Hello and welcome to Gecina 2025 full-year earnings conference call. For the first part of the conference call, the participants will be in listen-only mode. During the questions-and-answers session, participants are able to ask questions by dialing pound key five on their telephone keypad. Today we have Beñat Ortega, CEO, and Nicolas Dutreuil, Deputy CEO in charge of finance, as our presenters. I will now hand you over to your host, Beñat Ortega, to begin today's conference. Thank you.
Good morning, everyone. It's a pleasure to be with you to share our results for 2025, with a clear outperformance in terms of operational excellence and agile and proactive investment activity. I won't dive into the details just now, but the message behind these highlights is simple: in a long-term industry like real estate, we've been demonstrating our ability to grow steadily, constantly, and meaningfully over time. As we may see through our results, Gecina is not a pure proxy for the Paris region office market. Our differentiation lies in the product we deliver, designed for today's needs and built to anticipate tomorrow's. This is how we keep our portfolio: firmly positioned in a segment where true quality is scarce and demand remains solid.
The situation regarding office attendance was stronger in Paris than other cities following COVID, and current trends show that the return to the office is even more real now. Over the past year, many more corporates have taken firm positions, well beyond the early movers from 2023 and 2024. We are now converging towards a standard of roughly four days a week in the office. This has a positive consequence on corporate decisions: the number of companies taking the same surface of more are now a vast majority, two-thirds, while it used to be only a third three years ago. When the objective is to attract and retain talent, the equation is simple: reduce committing time by being located in the central areas and on major transportation hubs, and offer a workplace experience that generally feels better than home.
With insights from more than 500 companies using our spaces every day, we design products that mirror how corporates truly operate. Large organizations want destination assets for their head office. Yet supply is far more limited than people think. Offices above 3,000 sq m represented only 15% of deliveries over the past decade within Paris City. That's why we put such emphasis on delivering these large-scale projects in Paris and New York, on their design and adaptability also. Workforces evolve, and our spaces have to evolve with them. We complement this with a full suite of services, some shared, other privatized. We bring real intensity to energy performance, building highly efficient assets and working closely with clients to ensure consumption reductions last over time. Smaller businesses often lack dedicated real estate teams internally.
They want to stay focused on their core business, work in a space that feels like their own, especially protect confidentiality better than shared offices in co-working buildings, and deal with a single point of contact and a single invoice. We created a fully managed office, offered precisely to meet these needs. What sets us apart is that we own our assets, ensuring them the right quality and services in the long run. Let's now turn to our 2025 performance in figures. First, Velocity. Hundreds of visits, offers, negotiations, delivering nearly 120 leases, doubling 2024 pace in sq m leased. It gives us real visibility on our future cash flow, with EUR 86 million in annual rents secured on firm terms of over six years. A positive factor also is that we've been securing 75,000 sq m of leases that were due to mature in 2025, 2026, or 2027.
YouFirst, our fully managed office offering, captures exactly how the market is changing on small and mid-surfaces. We are achieving rents around 40% above market levels because we deliver a truly distinctive product. The market is clearly willing to pay more for better design, better services, and more flexibility. The momentum on the residential side is also strong. Over 1,700 leases were signed, three times what we did last year, with an acceleration throughout the year. A clear signal that our diversified service-enhanced, furnished housing offer meets a real and growing need. All this is driving solid rental growth, +3.8% like-for-like, with 2.6 points from indexation and more than 1 point from pure business performance, either rental uplifts or better occupancy, particularly in CBD offices and our residential portfolio. Let me pause on the 2.6% growth on current basis.
Our organic growth more than upsets the impact of portfolio rotation, where we have been very active to improve medium-term cash flows. On top of our leasing velocity, we have continuously activated all drivers to grow our cash flow. Revenues have grown consistently, more than EUR 100 million added since 2021. We've kept costs tight: lower property costs lifted rental margins, and G&A is down 4% year-on-year. Since 2021, our cost ratio has improved by 270 basis points, and I'll come to financial cost management later. The results, EBITDA and recurring net income are up again this year, with earning and earning per share rising by more than 4%. Since 2021, those metrics are up nearly 25%. On valuation, our portfolio is up 2.3% since year-end 2024 on the like-for-like basis. Here again, we see market bifurcation at play.
In central areas, values are rising, supported by a reopening of the investment market, with transaction volumes up 54% and a stronger rental dynamics in Paris and New York. Outside Paris, values continue to adjust in line with softer investment activity, while rent adjustments help secure occupancy. Let's turn to CSR. We are clearly early leaders in energy efficiency and carbon reduction, setting our first trajectory back in 2008. For us, this isn't a list of targets; it's a mindset. It's a conviction about how we run the business. Our strategy is simple, effective. First, before spending EUR 1 of CapEx, our engineering teams and carbon managers work with clients to monitor and optimize on-site consumption. Then we switch to decarbonized energy whenever possible. And finally, we invest where it creates the most impact. This approach delivers: since 2019, we've cut energy consumption by 33% and carbon emission by 63%.
Our monitoring is fully data-driven. We track temperatures in real time and continuously fine-tune cooling and heating. It matters: every 1 degree adjustment delivers roughly 7% energy savings. Thanks to this unique dataset on more than 100 assets, we are currently deploying new AI initiatives in dozens of buildings to sustain our targets. One example: at 144 Haussmann, a classic Haussmannian building, typically harder to optimize than new-generation assets, this approach cut energy consumption by 25% in just one year. Now let's just take a step back and look at how active we've been in capital allocation, not just in 2025 but constantly over the past 5 years. We have been disciplined and deliberate in capital allocation. Over 5 years, nearly EUR 3 billion of assets have been disposed, first to support our 2022 and 2024 deleveraging. It secured a strong loan-to-value to reopen our investment capacities.
We then recycled more capital into higher-yielding acquisitions and a development pipeline delivering double-digit return on invested CapEx. On disposals, our timing has been highly tactical. We've consistently crystallized value by reading market momentum early, creating competition, and selling under the best conditions. Over five years, it's roughly again EUR 3 billion of disposals. We first benefited from a strong appetite for secondary assets to divest properties outside Paris a few years ago. Later in the cycle, peak-year compression on core assets enabled us to lock in full value on some mature office and retail assets. And then we accelerated residential disposals, capturing strong appetite demand for operated housing and living platforms, with EUR 800 million of mature residential assets sold in 2025 alone, including the student housing portfolio. And we continue in that journey.
As I'm pleased to inform you that we have already secured EUR 200 million of additional disposals at end 2025, expected to close early 2026. In 2025, part of this proceeds was swiftly reinvested in acquisitions that were very appealing, both in terms of location and return on equity. This year, we deployed EUR 600 million that should deliver double-digit IRRs above our cost of capital, even at current share price, and more than two-thirds of these assets are already leased or under term sheet. The rent secured or potential represents the equivalent of 10% of the group's office rental income in Paris and New York. And none of this happens by accident. Execution is everything. And we've proven that we are credible committed buyers, leveraging in-house expertise, deal-enabling solutions such as past asset swaps, and our capacity to pay cash, limiting competition to get appealing deals.
Over the years, we've been also very active in recycling disposal proceeds into complex redevelopment operations, nearly EUR 1.3 billion since 2021. This has allowed us to reposition 25% of our office portfolio and more than half of it over the past decade. It's been a major driver for both revenue growth and value creation. We now have four flagship projects underway to fund, with EUR 430 million still to invest at double-digit yields on CapEx. Once fully let, these projects are expected to generate between EUR 80 million to EUR 90 million of annual rents. 2025 has also been a pivotal year in preparing the future of T1 Tower in La Défense. Building on the tower's strong fundamentals, including high-quality, efficient floor plates, and high ceiling heights, our goal is to reposition T1 as the upper end of that market.
That means creating a true prime asset, enhancing services, redesigning signature spaces such as the main lobby, and converting it into a multi-let tower to capture today's most dynamic demand, the mid-segment. The market in La Défense is constructive. La Défense has shown real dynamism in recent years. Demand for prime office remains strong. And with new supply expected to tighten once the current available space is absorbed by mid-2027, the project should benefit from favorable supply-demand conditions. On the financing side, the strength of our credit profile was once again confirmed by a best-in-class A- rating. It's been the eighth consecutive year. This translates directly into better financing conditions than others. Our July 2025 bond showed it clearly. Oversubscribed seven times with a tight 85 basis points spread. Preparing the future is a core commitment for us, and hedging is a critical part of it.
A clear indicator of how strong our position is is the mark-to-market of our fixed-rate debt. Simply put, the gap between what we pay actually today and what we would have to pay without hedging. At the end of 2025, as an equivalent, this figure stood at EUR 485 million. As an equivalent to net debt, this is more than two times better than the average of our continental Europe peers. It reflects both the volume of debt we hedge and the attractive levels at which it is hedged. We believe it's a significant competitive advantage against our peers and should give us visibility on future financial expenses and ensure a smoother, more manageable normalization. Let's turn now to the future. Based on the solid performance of 2025, we will propose to the general shareholders' meeting a dividend of EUR 5.5 per share.
This is exactly why we focus on rent growth and cost efficiency. For the second year in a row, we will propose to the next general assembly to increase the dividend. I'll come back to this in a moment. This reflects a strong 7% yield on the current share price with a sustainable 82% payout ratio. In 2026, we expect indexation to be very low. No surprise there. We also expect the market bifurcation to continue, supporting rental uplifts in central locations and requiring further rent adjustments elsewhere to retain tenants. Paris CBD and Paris City, La Défense, Boulogne will maintain the same focus in every submarket. Rents from our 2025 deliveries and acquisitions will also contribute to growth. We will maintain a strict cost discipline. Consequently, we plan to continue to grow recurring net income to between EUR 6.7 and EUR 6.75 per share.
Looking ahead to our next cycle of growth, I see three key moments. 2027, we will prepare for what comes next. The key building blocks are coming together as we work today to deliver and lease our four major pipeline projects. This will progressively offset the rent impact from Engie departure from T1 Tower. In 2028, we will unlock growth. The pipeline will reach full speed. T1 will be progressively relet. Both indexation and occupancy are expected to normalize around that horizon. And in 2029, we accelerate. Across the entire period, future rental income provides clear visibility on medium-term growth in terms of recurring net income per share. And in this context, obviously, everything being equal, we expect the company's dividend to gradually increase over the coming years from 2026 to 2030. And finally, this growth must be sustainable, and we are raising the bar for our 2030 targets.
The bar is high, but we've learned a lot in the past years, and we want to challenge ourselves while staying realistic, pragmatic, and contribute to the energy transition in the city where we operate. We'll go further on carbon reduction: below 5.5 kilograms of CO2 per sq m , with a plan to offset residual emissions on the operating portfolio. Obviously, we'll deliver net-zero assets across the development pipeline. We'll also aim to reduce energy consumption and meet stricter performance targets on the new developments. We want all of this to be independently certified, with continuous improvements of our certification levels over time. Thank you for your attention, and now we are happy to take your questions.
If you wish to ask a question, please dial pound key five on your telephone keypad. If you wish to withdraw your question, please dial pound key six. The next question comes from Véronique Meertens from Van Lanschot Kempen. Please go ahead.
Hi all. Thank you for the presentation. Three questions from my side, and I'll ask them one by one. Maybe can you elaborate a bit what's your view towards the breaks in the non-Paris office portfolio that you're seeing in 2026 and 2027? Are there already discussions ongoing, and what is the negative reversion that you now take into account for these sort of leases?
We've had no major breaks in 2027 except the energy that we have talked about a lot. And therefore, no significant trend reversion, negative reversion in those locations. Like I said, we have been renewing a lot of leases from those years in 2025. So nothing specific to say on there.
Okay. And maybe one question on maintenance CapEx. So I see on your slide 46 that the maintenance CapEx has increased every year, and I think in 2025 you're even reaching almost EUR 150 million. But still, you mentioned that you expect a run rate of EUR 85 million-EUR 95 million. So I was wondering, it's obviously one of the key worries for investors, for offices, that maintenance CapEx is going up. What's your view towards that and why you expect it to actually come down again?
Yeah. We have a specific situation on the residential side where, in fact, we have some aging buildings that we need to, especially on energy efficiency, reshape a bit the façade. So we have, since last year, but we still have probably two years or three years of refurbishing a bit those assets. So that's why it's somehow a bit temporary to catch up with those residential assets.
In terms of offices, you do not per se see a trend that the maintenance CapEx is going up?
No, specifically. No, it's really a catch-up on the ready side.
Okay. That's clear. And then maybe my last question is, so despite execution on, I think, some interesting capital recycling transactions, your share price, I guess, reveals that shareholders might not fully agree with either the strategy or the capital allocation decisions. And I appreciate that, obviously, it's a topic that's been discussed a lot, a share buyback. And historically, you've always said that as long as you can find more interesting opportunities in the market from a yield perspective, you should go for that. But taking also now your dividend yield of 7% into account, when I do the numbers, you can still sell even your higher-yielding assets, leverage neutral, and still do a very accretive share buyback. So can you maybe take us along in your line of thinking of that capital allocation decisions and how you're going to view that towards the future?
I think, like I said, I think capital allocation, it's trying to make a triangle between portfolio quality, future cash flow, and return on equity. And therefore, like I showed on this slide, we've been quite active on disposals. If we think there is no growth and the return on equity is lower than our cost of capital we dispose, so we have been, I think, among the only ones to dispose of EUR 3 billion assets over a short period of time. And the second is how to use those proceeds. And that's where we look always at the cost of capital.
And if we find alternatives and opportunities in the market where we are, where investment money is scarce, then if we get more than 10% IRR unlevered, then we go for them. And like I said earlier, share buybacks are a tool to allocate capital. It's one of the tools. In 2025, we have been very happy to find opportunities where we could generate a lot of value and at the same time improving the average quality of our portfolio. So that's what we have done in 2025.
Okay. That's clear. Thank you.
The next question comes from Florent Laroche-Joubert from Oddo BHF. Please go ahead.
Hi Beñat. Thanks for this presentation. So I would have three questions, if I may, and I can ask one by one. My first question would be on your dividend policy, your new dividend policy. So what could be the reasonable assumptions that we can take into account in terms of gradual growth and maybe in terms of payout ratio for the dividend for the next years?
In fact, two questions within one. The first one is payout. Obviously, medium-term, and I've been quite clear on that, we want to be in the range of 80-85 medium-term. That's a way to sustain through our recurring cash flow, the dividend, and the maintenance CapEx, which are supposed to decline over time. So that's one. And second, obviously, the growth will depend upon the speed of leasing both our pipeline and T1. So that's why we have been shy on the rhythm of growing the dividend, but it was to show that we are pretty confident in the medium-term to lease those properties. And that should drive the future dividend policy.
Okay. Okay. That's clear.
The decision. Yeah.
Maybe my second question, so in terms of capital equation and investment opportunities, so how do you think you are able still in 2026, and what is your appetite to find some new investment opportunities, so at least above your cost of equity or with IRR very significant?
Listen, our team's investment, we are very focused on the Parisian market, so we track and follow all transactions. For 100 transactions we look at, we strike one, so like you saw last year. So our duty is to look for those opportunities to create value. And obviously, it has to be accretive both in terms of earnings but also in terms of capital. So that's what we do on the daily basis. That's our duty. And that's the business of REITs. Anticipating what might come, it's not easy. But obviously, we are very dedicated to try to create value for our shareholders.
Okay. Maybe my last question. Maybe on artificial intelligence. Have you discussed about the impacts that we can have potentially on your different tenants? Have you discussed with them on how they could change their strategy for their future offices?
Sure. It's a topic we discuss with our clients. I think we have seen two ways to look at it. First, we saw a significant tech demand in Paris. We are lucky to train a lot of excellent engineers who are specifically very good at math. So we have seen most of the big tech taking more sq m and hiring people inside the city of Paris. And that's obviously companies which are looking for centrality. You saw that Mistral just took a big, it was not in our building, but just took a big building in Paris. But we have seen also Google last year. And most of the big tech, Datadog, have just signed a big lease next to Madeleine. So we see quite a decent appetite from tech companies growing their footprint in Paris because of the pool of talents.
The second, obviously, we might see, but it will be probably gradual, an optimization of some jobs. Clearly, if you look at newspapers and that took all views, the view for us is that it will concentrate the demand for the best because the ones that will sustain, in fact, their growth through the AI transformation will seek for centrality.
Okay. Thank you very much.
You're welcome.
The next question comes from Jonathan Kownator from GS. Please go ahead.
Good morning. Three questions, if I may, maybe one by one. Can you highlight how you expect the occupancy to change going forward? You said you've done a lot of leasing already in 2025 on some of these outside areas. And if you can focus, actually, specifically also on office versus residential with spot numbers. And the second question, but related, is what's happening with T1 in terms of leasing at this stage, please? And I've got one more after that.
Sure. Okay. In terms of occupancy, obviously, it fluctuates depending on who leaves and who comes. We see, like you saw, quite an increase in occupancy in CBD, the whole Paris, by the way. We have progressive leasing in Boulogne. So it should go up and down, but we have signed already two leases during these first weeks of 2026. So progressively, we should see a gradual improvement in Boulogne, but it's a long journey. And on the residential side, I think the average occupancy this year was 94%. And because of the active leasing during H2, the spot vacancy end 2025 is 96.4%. So we should see an improvement in the average occupancy in 2026 against 2025 on the residential segment. Regarding T1, Engie is leaving in April. We will start renovation.
We already have some leads because, in fact, if you try to find 20,000 sq m good quality, brand new, there is not so many offers in La Défense. But obviously, the tower will be delivered probably mid-2028, so we still have time. But yeah, we already start to have some leads on T1.
So just to clarify, you have already some leases signed?
No, leads.
Oh, leads.
Early conversations.
And the spot occupancy in office, are you able to give us that? I think you've given it in resi, but not in office.
Spot occupancy a bit more than 94, I think. It's pretty flattish.
Okay. The next question is really on EPS growth. Ultimately, I mean, obviously, you talk about IRR. Some of the projects that you're investing have a longer lead time. Do you see acquisition opportunities, like one that you did last year, more immediately accretive, or are you looking at your IRR on a long-term basis? I think one of the questions around investors has been on the growth path of EPS. Ultimately, how are you expecting to drive that going forward, and do you have a target? Thanks.
We try to do both, which is being accretive short-term and medium-term. So like I said, we are looking at IRRs, so the cost of capital, and the contribution to our cash flow. And that's what drives our investment decisions. So like you saw what we did in 2025, in fact, we have both Solstys now named Signature, which had one year and a bit of renovation, so pretty short in terms of delivering rents, potentially. And we bought Bloom, which was immediately accretive. So yes, we try to balance both to generate long-term and value creation but also short-term accretion.
Okay. And do you see more opportunities like that in the market, or are they more long-term redevelopment that you're looking at at this stage?
We are looking at a lot of situations that are quite common, but so far, nothing specific.
Okay. Thank you.
You're welcome.
The next question comes from Stéphanie Dossmann from Jefferies. Please go ahead.
Hello, everyone. Thank you for the presentation. I will have, yeah, maybe three questions from my side. I will ask them one by one. To follow up on the acquisition opportunities, would you contemplate opportunities abroad, for instance? The London office market looks more attractive currently, so I was wondering a bit of what is your appetite of growing the platform abroad. Thank you.
So far, not really. I think buying one, we are an operating company, so buying one asset would need to be the full team to generate, in fact, what we are capable to generate in Paris. We need the local knowledge. So we are not really looking at a single acquisition abroad.
What about not single? I mean, platforms?
Well, I never like to commit on M&A. I think the best way to never do M&A is to commit M&A. Same on acquisition. Our duty is to monitor the situation and to see if we can find an accretive deal for our shareholders. Nothing more to comment on it.
Fair enough. Thank you. Second question is related to your guidance, and I was wondering what is included on top of your annualized rent rule of EUR 708 million in terms of either relating acquisitions and especially net financial expenses and including capitalized interest. How do you see those going forward?
We never budget any acquisition because it's the best way to burn the cash and not being financially savvy. So we don't budget any acquisitions in our budgets, nor this year but neither the year before. And in terms of financial costs, as you might have seen, we are pretty well-hedged for 2026. And capitalized interests go with the CapEx. So when we spend EUR 1 of CapEx, we capitalize the cost of debt attached to that CapEx. So it's pretty homogeneous against what we did last year and the year before. No change with that. It's really along the CapEx spending program.
All right. In other words, what is the difference between the low end and the high end of the range?
Well, it's really a series of small assumptions. But mainly, in fact, if we can deliver, like I said, a better occupancy on the resi, some leases on the office side, and ideally, an even better performance and a better speed of execution on the operated offices, you know that the operated offices are delivering significant uplifts in rents, but it depends upon tenants leaving our space before we can release them. So most of the time, it's small surface. So we get the notices three or six months in advance. So if we receive a bit more, then we will have better uplifts and therefore a better cash flow next year, so. But it's a lot of small moving pieces.
All right. Thank you. The last one, as you touched upon reversion, I was wondering why it's not declining, why the market rents are decreasing on average, let's say, something like -5% in the effective rents in the CBD currently. So why your reversion is still so sound, I would say?
I will do self-promotion. I referred to it at the early stage of our presentation. Our duty as a company is to deliver distinctive products which differentiate from the overall market. So that's why we have taken the view that we have basically in Paris two kinds of clients that have different needs. One, which is for the large head office, they need efficient buildings with large floor plates. So that was typically the rationale for Mondo. That's typically the rationale for Signature, the former Solstys we bought in July, which is offering them an efficient way to work together. Obviously, if you are a large tenant, you don't want to be split in 10 floors if you can be in only one floor. So delivering those large-scale programs is a way for us to address what the head office needs.
And on the other side, we see a more need for flexibility but keeping the premiumness. So we have lawyers. We have some executive teams from large corporates which are on the outskirts. We see new tech companies, but those guys don't have any real estate teams. So we deliver them, in fact, a product where they just come with their desk, with their laptop, and they can use the space while keeping confidentiality.
So they are in their own space, but they don't have the hassle to manage all the real estate expertise, taking a maintenance contract and managing coffee and taking the cleaning contract and having to buy the logo at the entrance of the office and hiring the receptionist and so on. So we take care of all that so that they can dedicate their energy on their own business and not on real estate. By addressing those two, we create difference against the general market. That's a bit the way we have been capable, in fact, to generate uplifts.
Thank you very much.
It's a hard work, but that's our DNA.
Thank you.
You're welcome.
The next question comes from Neil Green from J.P. Morgan. Please go ahead.
Hey, good morning. Thank you. Just one question, please, and a follow-up, I think, to Florent earlier on. On the dividend growth guidance from 2026 to 2030, are you underwriting a higher payout ratio as a driver of that, please? If so, to what? And is it back to that 85, please? Just interested in any assumption around the dividend payout ratio over that period, please.
It could be one year or two if we can't sustain an increase of cash flow. But that's why we gave a medium-term guidance, which is over the long run. In fact, those assets pipeline T1 will be let, and we will be capable, in fact, to stay in our preferred range also once the CapEx on the residential side are behind us. So that's a bit why, in fact, we have been providing that vision.
Perfect. Thank you.
You're welcome.
The next question comes from Callum Mallyon from Colliers. Please go ahead.
Hi, guys. Thank you for taking my question. Just two quick ones. First one, there seems to be quite a bit of office space coming online in Paris this year, and obviously, CBD vacancy continues to trend higher. Is it fair to assume your record-high occupancy could come under pressure in 2026 and 2027? And then secondly, how do you weigh up future development opportunities versus acquisitions when your current office development yields are 5.8%, but you're acquiring assets at 6.1%?
Those are two questions. I think on the first one, I will come back to what I said earlier, which is what we try to deliver to our clients, products which are different. I refer to one thing, which was on the head office stuff. Only 15% of the new deliveries in Paris have been above 3,000 sq m. So our major projects are significantly bigger with significantly more bigger floor plates and significantly more services: fitness or gym, food offer, meeting rooms, auditoriums. That's what we deliver to those people that they can't find on a small building, which is one like the other. And on the other segment, because we are an integrated company, we have our own asset management team, our own design team, our own property management team.
In fact, we can generate, without a big pain, those operated offices that they can't really find on the market. It's only 5% of the offer in Paris, while it's more than 20% of the takeup. And that's because, in fact, we are an integrating company. And like you saw, we have been capable, in fact, to generate that offer that needs a lot of work for our teams while keeping the G&A down by 4%. And that's because we were already taking care of the maintenance of the building. So why shouldn't we take care of the aircon of the tenants? If anyway, we have a cleaning contract for the whole building, for the lobby, for the lifts, why shouldn't we be capable, in fact, to extend that contract into the private areas?
So we've been doing both, in fact, try to optimize our cost structure, but at the same time, increase the quantity of services we deliver to our clients. And that's the way we make a difference. Regarding your question around acquisition and development, I think we have a pretty visible development pipeline, which is underway, those four projects plus T1 that will come next. So that's already a significant development pipeline. And that's why we looked at opportunities with Solstys or with Bloom that were a bit different with a different risk profile. And you're right. It was done in quite appealing conditions to generate a good IRR.
Thanks.
So I will now just take one written question. What is the difference between the announced +3.0% +2.3% increase in asset value on a like-for-like basis and the EUR 23 million negative fair value change recorded in the income statement? Thanks.
Yeah. Thank you for this technical question. I think it's technical items that can explain the difference between the two. Some are one-off. For example, in 2025, we had an increase in the stamp duties in most of the cities in France and specifically in Paris. So it has an impact on our valuation of more than EUR 60 million. So it explains partly the difference. Other items are a little bit more technical. That's IFRS 16, that we are accounting leases which are IFRS ones, meaning that we are spreading the tenant incentives over the duration of the lease. And so the difference between the cash we are getting from the tenant and the amount we are accounting is going through this IFRS 16 adjustment. Depending when we are on the lease, it could be positive or negative. But for this year, it's a negative impact.
The next question comes from Michael Finn from Green Street. Please go ahead.
Yes. I just wanted to ask, please, if you could confirm that you do not plan to add any more buildings to the pipeline. I believe it was on page 11 of the press release yesterday that you plan to refuel the pipeline in 2029. But I just want to double-check that, please. Thank you.
Against the quantum we have currently, no, there is not a pipeline project which are similar to those which we are doing currently.
Okay. Thank you. And one more, if I may, just on capital more generally. I'm just curious, in general, should 2026 be viewed as quite similar to 2025 in that you will sell some assets and you will redeploy it into offices? And maybe linked to a question earlier, I'm just curious, in your view, at what share price or implied yield does it make more sense to just buy back the shares? I assume you probably have some kind of view on that since you said that you're going to that you'll be looking at every option that you have.
Yeah. If you do simple math, based on our dividend, it's a 7% return. Based on our cash flow, it's an 8-point-something% return, so pure cash to cash. Our weighted cost of capital is around 7-point-something% because our cost of debt is low. But even at our margin and cost of debt, you are between 6.5%-7%. So if we can find decent deals with the same quality or even better than what we own, obviously, all those deals are accretive in terms of return on capital and accretion. So that was the rationale for us, in fact, to go on those two deals that seemed appealing for us, both in terms of accretion, one immediate and the other one a year later, and in terms of return on capital.
So obviously, the share price increased our cost of capital the way we look at it because it's pretty low. But as long as we can find those deals that improve our portfolio, improve our cash flow medium term, improve our future, obviously, we look at them, and if it flies, we go. And we will monitor it over the next year. I think where somehow I'm quite happy with what we have done this year. Somehow, in these quiet investment markets, and the teams will not be happy that I say it, but it's somehow easier to buy at 6.5% net initially than to sell at 3%. And probably, we are not insisting enough about the quality of our investment team to have been capable to source more than 10 buyers to buy almost EUR 1 billion around 3% cap rates.
And I think it's a tribute to the teams and our dedication and our footprint where we are to have been capable, in fact, to secure EUR 1 billion below 3%, around 3%. So that's why I said before talking about acquisition, you talked about acquisition. I talked about, first, the pleasure to have been capable to secure those disposals because that's the first step before being capable to make capital moves. And I think we have shown, and probably way better than most of the industry, that we are an agile divestor. We sold one luxury retail building at the peak evaluation of luxury companies. We sold secondary assets at the peak of SCPI fundraising. We've been disposing office assets in 2023 below 3% cap rates. So we are pragmatic, but I think we have been probably, and I'm looking around, the best seller of assets. I hope that we will be happy with the returns we generate on acquisition and development pipeline.
Great. Cheers. Thank you.
You're welcome. But again, 3% is not easy.
The next question comes from Céline Quirot from Barclays. Please go ahead.
Hi, Beñat. I've got three questions, please. The first one is about capitalized interest. Can you confirm the policy that you have for them? What cost of debt you're using? Is it average? Is it marginal? And also, by how much is it meant to increase this year? What's inside the guidance? And then my second question will be about your firepower. What's your firepower without a credit downgrade? And last question on share buyback again, sorry. Do you actually have the approval to potentially do a share buyback, or is that something that could be included in the next AGM? Because like you said, it's a tool to allocate capital. Thank you.
You're welcome. On capitalized interest, we have the same way to do it. The site value of the asset is capitalized at LTV, at the current average cost of debt, and the CapEx are capitalized 100% at marginal cost of debt. So that's the way we capitalize interest. So that's why I said.
Can you confirm it hasn't changed or it's not supposed to change this year?
No, no, no. It hasn't changed. That's why the more we spend CapEx, the more capitalized interest we have because if we have spent EUR 1 million in a building, then we capitalize 3%. But when we start construction, we only capitalize based on EUR 10 million or EUR 20 million in our books. On SBB, you asked a technical question, which is, do we have the approval? Yes, I think we have, since several years, an approval from the General Assembly to make a share buyback. It's really a board decision to execute one.
Okay. And your firepower?
Firepower, a polite way to do it is to say that if we want to keep our A-minus rating, we need to be medium term below 40% in terms of LTV metric. Obviously, if we sell, we have more firepower. It's not a fixed barrier, somehow.
Okay. I had roughly EUR 500 million in mind without you selling. I just don't know if you can confirm that.
The LTV excluding stamp duties is slightly above 38%. So it's probably less than that. But again, it's more medium-term objectives that we have with the rating agencies. So we can marginally go above and through either our cash flow or asset valuation, be back to that threshold. So it's not a strict rule year by year.
Okay. And sorry, last question. A bit open this one, I'm sorry. The market's not reacting super well to your last set of results. We know the market's not great at the moment. What can you tell the market to reassure it that things are going okay?
I think it's two things. The first one is when you invest in a REIT, because of our distribution obligations, we are there first to generate a dividend. And that's why we conveyed confidence in the future to be capable, in fact, to sustainably pay and grow our dividend over time. Second, I think we still have a lot to do, in fact, to have great future years, especially leasing our pipeline in T1. Just have in mind that we have been having those questions in the last five or 10 years. Each time we had large-scale redevelopments happening, it happened when we leased the BCG Live. It happened when we leased the Publicis in Mondo. It happened when we had to release a full building in La Défense Carré Michelet in 2020 and 2021. And all those operations have been fully let pretty quickly.
I think the history of the company, the knowledge of the market, the product we build should give confidence in our capacity, in fact, to generate that growth that we all expect. Probably the last one is discipline. We keep our balance sheet you refer about LTV. We try to keep our balance sheet ready for the future, both in terms of LTV, also in terms of hedging, long-term liquidity. Have in mind that we have EUR 4 billion of an available credit line. We have visibility on both liquidity and cost and same discipline on acquisition and disposals. We are there to, in fact, to sustainably grow our company, and we are very dedicated to it.
Thank you, Beñat.
You're welcome. Thank you, Céline.
The next question comes from Paul Reuge from Rothschild & Co. Please go ahead.
Hi, guys. Thank you for the result. I mean, sorry, just a last question, your capital allocation. If I understood correctly, you say that until you have opportunities to invest or deploy capital in developing assets at a 10% IRR, you won't necessarily look at buying back shares, which basically, if you leverage that, you go something between 10%-15%. Regarding your cash flow yield today around 8%, I mean, I would suggest that you won't buy shares before another drop of something like 30% on your share price. I mean, is it something you can give some colors on that because you didn't really answer on the previous question at which price you will buy back shares?
I think it's not the right question, if I may. Our duty is to offer the best return on capital. So it depends on how much cash do we have and how can we deploy it with the best return on capital for our shareholders. So it's a combination between the cash generated and the way to allocate them. So it's a triangle. It's one, securing disposals. Like I said, we have been very active on it. Second, the share price, and at the same time, the opportunities at the same time. So.
I mean, yeah, you've been very active on disposal, and that's clearly, I mean, quite nice. And effectively, you have a great track record on that. But I think at one point, this money could be used to buy back shares, and I think the market seems that too. So that's why I'm trying to understand a bit.
So as long as it's the best capital allocation in terms of return on equity.
Okay. But so my hypotheses are correct regarding at which level you would be ready to buy back shares regarding the IRR?
It has to be better than our acquisition potential and better than the disposal we make. Again, I can't opine on future acquisition. I don't have them in mind because they are not yet there. If they are known, we will look at the best way to allocate capital. I have not said no on share buybacks. I've just said it's a disciplined analysis each time, year by year, deal by deal.
Okay. Thank you very much.
You're welcome.
The next question comes from Marc Mozzi from BofA. Please go ahead.
Thank you. Very good morning. I just have a follow-up question on your capitalized interest. Can you give us a guidance of what we should expect for 2026 because it's a pretty odd number for an analyst to forecast? And actually, the question behind it, if we were to remove that growth in capitalized interest, what would have been the growth in EPS?
I don't have the figures now. We will provide you a bit more color on it outside the call if you want to, Marc.
Yeah, sure. That would be great. Thank you.
There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.
Thank you all for attending this meeting. Thank you all for all your questions that were very insightful. See you soon. Bye-bye.