Hello, welcome to the Klépierre's half year earnings 2019 call. Please note the call is being recorded. For the duration of the call, you will be on listen only. However, there will be an opportunity to ask questions, and this can be done by pressing star one on your telephone keypad or via the webcast. If at any point you need assistance, please press star zero and you'll be connected to the operator. I'd like to hand over to Jean-Marc Jestin to begin today's conference. Thank you.
Thank you. Good morning, everyone. Thank you for joining us today. I'm Jean-Marc Jestin, Chairman of the Klépierre Executive Board, and I am happy to be here with Jean-Michel Gault, our Deputy CEO, to present Klépierre first half 2019 earnings. In this presentation, we will cover five topics. First, I will say a few words about our strategy, which in our view explain why we keep posting all these earnings in a fast-changing environment. After which I will go over the highlights of the first half and cover our operational performances. Then Jean-Michel will present our financial in details. First, a few words about the current environment and how we are navigating in it, because it can appear surprising that we continue to post solid results when the market seems to believe that the retail and the retail property sectors are doomed.
Of course, to us, this is no surprise. Sure, we are facing challenges. The transformation of retail is underway. It is happening pretty fast, and those who did not anticipate it are struggling. Some believe that in this new omni-channel world that we are getting to know, traditional players will lose. Only the extent to which they will lose may vary from one player to the other. I don't believe this. I believe that some will indeed lose, but many others will win. I believe that omni-channel retail benefits those retailers who know how to embrace it, and mall owners who can support this transformation. Take sales. Some say online sales are growing at the expense of in-store sales. Total sales are supposedly not growing. There will just be a redistribution of sales between the two channels. This is not true.
Statistically, total sales are growing, and there is even a correlation between online and in-store sales growth. It is now well documented that the retailer's online sales grow faster in an area where the retailer has a store. On the upper side, online sales drop in a catchment after a store closure. You just need to have the right store at the right place. Some argue that consumers' habits are changing at the expense of the shops, that they are less inclined to go out and shop in malls. That it is not what we are seeing every time we renovate our malls, every time we change a mix, every time we organize events and enhance our customer care, we see footfall and sales increasing because the physical and emotional connection experience is simply more powerful than what we can get digital.
One last argument on the pessimist side is that retailers margin are falling. They can't finance the retail transformation. It is true that many retailers face pressure on their margins. They all know, and we know, that if there is any online profitability at all, it is very limited. They need fewer store, but better stores to consolidate their overall profitability. For many years, we have been implementing a strategy to leverage this retail transformation. This is a 3-tier approach. First, our capital allocation is driven by demand from the best performing retailers on the continent. We keep or buy the assets they want to be in. We invest in those properties. The others, we sell. Secondly, we take good care of our consumers to be sure they come to our malls, stay a longer time, and want to come back.
For this, we have four initiatives that most of you are already familiar with. Retail First®, to get the best of retail in our shopping centers. Let's Play®, to make our malls entertaining. Clubstore®, to convey a sense of hospitality and ensure seamless customer journey. Last but not least, Act for Good® to make sure our business is sustainable and creates value for our local communities. The third pillar of our overall strategy is financial discipline. CapEx is spent wisely and only if it is cash flow relative, and we keep our debt stable, if not lower. It is easy to increase cash flow with higher leverage. We never did it and will not do it. I think this strategy is paying off. In the first half, once again, we posted solid results. Our like-for-like NRI grew by 3.1%. Our net current cash flow increased by 5.4%.
We delivered on our disposal plan, we deleveraged the company and further reduced our net debt to EBITDA ratio, which is now close to eight times. We will come back to all these points in greater detail during this presentation with Jean-Michel. All of this make us confident for the future and starting with this year. Considering among other things, the good level of our operating performance, we have decided to raise our cash flow guidance for 2019 from between EUR 2.72 and EUR 2.75 to at least EUR 2.76 per share. In fact, looking forward, we think we'll be able to continue growing our revenues. Structural reasons for our confidence. When all the smoke clears, everyone will realize that the physical store is central to a retailer's ecosystem, because this is where emotional connections happen and brand loyalty is built. This is also a showroom for the online marketplace.
The store will increasingly play a role of a logistic hub, and this is where the profitability remains. Retailers don't pay rent for a store just to make sales in this store. They are investing in an essential asset in their omni-channel ecosystem. The best performing retailers, we know them well, and they like our properties and the way we run them because they are distinctive places. Please never forget our occupancy cost ratio are on average low, around 12%. Our cash flow will grow even further because beyond this increase in our like-for-like rental growth, we will pursue our accretive capital allocation. We continue to work on our pipeline projects to extend and to refurbish our properties. Our cash flow growth will also be sustained by further reductions in our interest expenses. Everyone was betting on rising interest rates.
They have actually gone down significantly, which considerably change the picture. Klépierre is a growth story. We have designed our strategy for this. Let me touch on the highlights of the first half. Starting with NRI. As I said earlier, NRI grew by 3.1% on a like-for-like basis. This is significantly above indexation. As you can see, all countries are positive. Iberia and the Netherlands led with impressive growth. On the leasing side, our leasing teams maintained strong deal flow. 821 leases were signed in the first half at an average 9.4% reversionary rate. The lease includes 689 renewals and re-lettings. Once again, the Netherlands and Iberia led the way in reversion. Our operational metrics are also well-oriented. The good leasing performance I just mentioned translated into lower vacancy. We can now say that we are back to pre-COVID levels at 3%.
OCRs increased in a reasonable way and remain low as I indicated earlier. Bad debt remains at a very low level. Retailer sales recovered somewhat at +1.6%. They increased by 0.8% last year, as you know, the first quarter of 2019 was specifically soft at 0.2%, but the second quarter was more dynamic at +2.8%. As usual, geographic performances were mixed. Iberia and Central Europe are still benefiting from dynamic consumer spending trends, while France is recovering from the yellow vest protest. From a segment perspective, food and beverage, health and beauty remain the best performing segments, while fashion was slightly positive. Another notable event of the first half is that we sold EUR 501 million worth of assets. On this map, you can see that we have sold over the last 18 months for a total of EUR 1 billion.
This demonstrates that thanks to our pan-European footprint and our good investment team, we can continue to sell a variety of asset to a variety of buyers and at good conditions, 3.5% above book value. It is also important to stress, as we see on the other side, the evolution of the value of the 11 malls we sold in the first half of this year. They were sold 5.5% above their latest appraisal value, but 18.2% above their 2015 valuation. The last highlight I would like to cover is financing. As I mentioned in my introduction, the decline in interest rate is an important feature of the first half to take into consideration and to assess the value of our business. We raised capital on the bond market at historically low conditions with our 11-year bond at just 0.625%.
We also continue our de-leveraging efforts, reducing our net debt in absolute terms by nearly EUR 60 million in the first half. Let's quickly take a closer look to our operational performance with our four operational pillars. Starting with Retail First. We continue to transform the retail offering in our malls at a very fast pace. In just six months, as you can see on this slide, we have managed to significantly rotate the mix of five shopping malls. At the group level, the adaptation of the mix is also very significant. This graph shows that we continue to replace struggling segments such as toys and gifts or fashion by more profitable ones such as health and beauty, fitness, and sports. As you can see, the figures are quite impressive.
We are also able to expand the presence of retail champions in our malls, thanks to our very privileged relationships with them. We signed a handful of deals with each of the leading brands you see here. They are among the retailers who embrace the transformation of retail and know how to manage the omni-channel world. There are also obviously newcomers to our malls and in some instances, to the shopping center market, like Dyson, Hawkers, Netflix, Daniel Wellington, and many others. Proving once again that our malls are very attractive places to build brand awareness indeed. As I said earlier, the success of sports stores is continuing. Sports retailer sales have increased by 8% since the start of the year, which is significant. We have signed 28 new deals with brands such as Nike, Decathlon, JD, Foot Locker, Décimas.
Moving to the Let's Play, we are also accelerating our event strategy. The quality of our events is increasingly high, and they do have a powerful impact. Let me take a few examples. In the past few months, we have deployed two new licensed events in our malls across Europe. One is for the latest Spider-Man movie, "Far From Home," which has been a tremendous success, and footfall was up by 17%. The second was in e-gaming with the European tour of Just Dance. It is making stop at several of our malls. The Créteil Soleil edition was amazing, I must say, with 12% footfall increase. Let's Play is also about the digitalization of our relationship with our consumers. Our digital ecosystem is expanding rapidly.
Take Instagram, for instance, our consumer, our best ambassadors, and they like to post photos of what is happening in our malls on their Instagram accounts. Our number of Instagram followers increased by a massive 55% year-on-year in the first half. Turning to Clubstore, we keep renovating our malls to infuse a sense of hospitality and ensure our consumers feel pampered. In the first half, we completed the renovation of five malls, Plenilunio in Madrid, Assago in Milan, Lublin Plaza, and Poznan Plaza in Poland, and Portet near Toulouse in France. This generates a return. Retailer sales on a 12-month running basis have increased by 4.2%. Definitively, more customer care means more sales for our retailers. The overview of our operational pillars wouldn't be complete without Act for Good, our CSR strategy.
I would like to highlight that we at Klépierre are at the forefront of our industry in terms of efforts to reduce our carbon footprint. For this, we are reducing our energy consumption across the board. We are also committed to using 100% electricity from renewable sources by 2022. At the end of the first half, we were already at 83%. It's very encouraging. This means a lot in terms of reducing greenhouse gas emissions. To conclude, just a few words about our two main ongoing development projects. The extension of Créteil Soleil is proceeding according to plan, which is almost entirely leased four months before opening. The great brands include a handful of trendy restaurants for the food avenue that we are creating. In Bologna, we are reinforcing Gran Reno lead in position in its catchment area with a 24,500 sq m extension.
The construction works are starting as we speak. Pre-leasing rate is at 50%, and this mall makeover is going to be truly magnificent. With this, I will hand over the microphone to Jean-Michel for the financial review. Jean-Michel, your time.
Thank you, Jean-Marc, and good morning, everyone. Before digging deeper in our financial performance, let me briefly come back to one of the main highlights of this first half, which was rapidly mentioned by Jean-Marc, interest rates. When we prepared our budget at the end of last year, we were not expecting such a drop in interest rates. Looking at the 10-year Euro swap curve, we are today at close to zero. That's an all-time low and close to 100 basis points lower compared to last December. Obviously, this has and will continue to have positive implications, not only for P&L and for the structure of our debt, but also for the underlying assumption related to valuation. Let me start with our balance sheet and the portfolio valuation. Over the past six months, our portfolio value declined by 0.9% on a like-for-like basis.
When looking at the changes in the main assumption used by the appraisers, it is worth noting the slight increase in the risk premium and the slight decrease in the risk-free rate and corresponding lower indexation. When it comes to the risk-free rate, the change has been relatively limited at roughly 10 to 15 basis points. Overall, on a like-for-like portfolio basis, the discount rate used by appraiser was broadly stable, with the exit rate increased slightly. This explain why the market effect has been slightly negative, -1.2%. Regarding the NRI forecast, thanks to LC renewals and despite slightly lower indexation assumption, NRI growth was broadly unchanged. This is consistent with our view that our like-for-likes revenue will continue to grow going forward. Our EPRA net initial yield was stable at 4.9%. When comparing it with the spot risk-free rate, the spread now stands at 420 bps.
This is huge and much higher than we have seen in the past. I think it's interesting to note that our portfolio yield has only decreased by 80 basis points since 2011, while the risk-free rate has collapsed by 350 basis points. This is even more striking when we compare with other investment classes. Looking at the bond market, for instance. Back in 2011, Klépierre issued a 10-year bond and got a coupon of 4.75% at that time. This year, as Jean-Marc mentioned earlier, we issued an 11-year bond for a coupon of 0.6%. This is a compression of more than 400 basis points compared to 80 basis points for our EPRA net initial yield. That is to say that we operate in a very different environment.
We continue to believe that valuation will not decline materially, sustained by continually growing cash flows, while yields will remain broadly stable, sustained by a lower interest rate environment. Moving to our EPRA NAV, the evolution in the portfolio valuation translates into a slight decline in our EPRA NAV. Our EPRA NAV per share stood at EUR 40 at the end of June 2019. This represents a 1.3% decrease compared to December 2018. The main drivers were the strong cash flow generation, EUR 1.30 per share, more than offset by the asset revaluation for minus EUR 0.80, and the interim dividend payment for EUR 1.05. Forex and other operating and financial costs were mostly responsible for a EUR 0.7 reduction in NAV, while our share buyback program had a positive impact. Our EPRA triple net NAV is at EUR 39 per share at June 30, a 3.5% decrease.
The gap compared to EPRA NAV reflects the fair value of our fixed-rate debt, which, as mentioned earlier, was impacted by the drop in interest rates during the first half. Moving now to the cash flow. We continue to grow at a sustained pace. As you can see, we posted 5.4% growth in our net current cash flow, despite a slightly negative impact from our capital allocation. Once again, this is a very solid performance. In the first half, the main driver for our net current cash flow growth is the NRI like-for-like. Part of the NRI increase is from indexation and reversion, but we also generated higher specialty leasing income, a contribution of 30 basis points, and reduced our service charges for 15 basis points. The reduction in our financial cost has also contributed to our net current cash flow growth.
In fact, we reduced our average cost of debt by a further 10 basis points in the first half to just 1.5%. Regarding the capital allocation, the dilutive impact of disposal completed in Italy and Hungary at the end of last year, and the disposals in France and Portugal at the beginning of this year, was slightly higher than positive contribution from recent development and the share buyback program, which we implement, as you know, in connection with disposal proceeds. Looking ahead and considering the net current interest rate environment, we believe we have further potential to lower our cost of debt. In the next three years, we will have to refinance bonds worth roughly EUR 1.8 billion at an average coupon of 4.2%.
Taking into account that some of these bonds have been partly or fully swapped at variable rates as indicated on this graph, the average coupon stands at 2.7%. Assuming we can refinance these bonds at the same 0.6 rate as your recent 11-year bond issue, we can even choose for a shorter duration if rates are going to increase. We could save approximately EUR 40 million per year or 5% of our net current cash flow. This is clearly very substantial. We are used to saying that we are very disciplined when it comes to our leverage. This implies allocating recurring resources, such as our net current cash flow, to finance recurring items, such as the dividend payment and maintenance CapEx. On the other hand, to finance less committed or non-recurring expenses, such as our development pipeline, acquisitions, or share buyback program, we generate proceeds from disposals.
Once again, in the first half of 2019, our net current cash flow more than covered the interim dividend and distribution to minority partners, as well as maintenance CapEx, which amounted to EUR 41 million, of which EUR 9 million are recharged to tenants. As you can see on this slide, our cash flow was even sufficient to finance our EUR 79 million in development CapEx as well. Our second source of cash consists of proceeds from disposals, which reached EUR 257 million in the first half. Part of this was allocated to share buyback, and the remaining amount to pay down our debt. As a result, we continue to bring down our net debt to EBITDA ratio to 8.1 times. As we often like to emphasize, cash flow growth should be looked at together with the evolution of the leverage.
Since the end of 2015, we have reduced our net debt to EBITDA ratio by 1.1 time while generating 27% growth in the net current cash flow per share. I believe this is quite a remarkable and unique performance. Thanks to this consistent deleveraging, today we are very well positioned. Our leverage is among the lowest of European REITs. We believe this is a great strength in the current environment. Now, before taking your question, let me briefly conclude this presentation. Once again, we deliver a strong set of results in the first half in a transforming retail environment. Our malls keep delivering and gaining market share. Our like-for-like NOI grew by 3.1%. Our net current cash flow was up by 5.4%. We were quick to deliver on our disposal plan.
We continue to leverage the company and further reduce our net debt to EBITDA ratio, which is now close to eight times. As a result, we are raising our guidance for net current cash flow per share for 2019 to at least 4.2% growth. This clearly demonstrates our confidence in the future. Thank you very much for your attention. Jean-Marc and I are now ready to take your questions.
Thank you very much. If you would like to ask a question, please press star one on your telephone keypad and please ensure your line remains unmuted locally. Once again, if you would like to ask a question, please press star one on your telephone keypad and please ensure your line remains unmuted locally. Our first question comes from the line of Bart Gysens from Morgan Stanley. Please go ahead with your question.
Hi. Good morning. Can you hear me? Hello?
Hello. Yes, we hear you very well, Bart.
Okay. Hi. My question is about the MGR uplift for the leases that you signed. If I look on page two of your press release, you say you signed 821 leases for the first half. That's giving you about EUR 6 million of additional minimum guaranteed rents. Now, if you look at the first quarter, you signed about 400 of those in the first quarter when you had almost EUR 8 million of additional minimum guaranteed rents. Can you reconcile the two? Was the second quarter just a bit weaker, or am I getting the wrong end of the stick here?
It was a very detailed question, but I need a few seconds to answer to it. What I've been told is that the EUR 8 million you are referring to includes the new letting, which is not included in the numbers you are referring to in the first half year. The two numbers are not comparable, so we should break it down for you.
Okay. It looks a bit confusing, right? 418 leases in the first half with EUR 7.7 million of MGR, then another 403 leases in the second half, and it looks like you've lost EUR 1.7 million of MGR there. I think it would be good if you can tell us whether they are not comparable or comparable at all.
Sorry for the confusion that the numbers are. We'll provide the details, and give you more comfort about the numbers.
Great. Thank you very much.
Thank you. Our next question comes from the line of Peter Papadakos from Green Street Advisors. Please go ahead.
Good morning. Just I have two questions. One is, I guess, on slide 16. Thanks for the additional disclosure on disposals and how they progressed. When I look at that slide, just very basically, when I take around the 20 assets and the EUR 1 billion, the average ticket size is around the EUR 50 million mark. Can you comment on how the valuation has performed between, let's say, the assets which are under EUR 100 million versus the assets that are above EUR 500 million? We do hear from various sources, credible sources in the private market that, actually the bigger malls are finding it more difficult to find ultimately bids because it's very difficult to go through investment committees when you have to commit EUR 400 million as opposed to EUR 20 million.
Can you give us a little bit of color in terms of how your portfolio has done by size? Any sort of additional comment would be good. The second point, I appreciate you making the point about collapsing interest rates, but I guess the other side of that coin is that growth expectations should also be coming down. When you think about yield as well as growth, and you think about that slide 34, where you say the risk premium is at an all-time high. If you went back and did that yield plus growth, do you think we're still at an all-time high from a look-forward total return perspective? Or is actually the growth expectations coming down faster than in the past, and therefore, the spread is not as big as we would like?
For the first question, I think we don't itemize too much by size of the assets because we are claiming that the top-end properties in terms of size for [KPI], it's 93% of the portfolio. It's clear that we have 7% of our portfolio which are low, smaller shopping malls or retail properties that we are selling from time to time. There is not a big, I would say, it's difficult to say if size really matters. I think in terms of valuation, I think what matters the most with valuers is that what they consider as prime and what they consider as non-prime. There is a yield expansion in the non-prime assets. Non-prime is qualified as not dominant in a catchment area, lower gross profile in terms of NRI, and lower demand from retailers. It's not really a matter of size.
When it comes to investment market, I think it's clear today that the investment market is quite muted in many places. There is a lot of discussion about it. When it comes to what we are doing on the non-core assets we are selling, we see a lot of investors of different nature, buying assets, yes, ranging between EUR 20 million and EUR 100 million. There is a market, as you said, for that. For bigger transactions, we are not a seller of bigger assets, so we cannot comment. It's clear that this type of asset, there is a lot of buyers for it.
For the second question.
Well, for the second question, I am not sure we got all the content of your question. Just to phrase it our way. First, I would like just to stress that speaking from valuation, because it has been a very limited transaction, as you know, into the market, especially for prime assets, which put valuers a little bit in trouble, as you know. What we can say is when it comes to a Klépierre portfolio valuation, they have as an overall assumption a 2.4% revenue CAGR in their discounted cash flow with a 1.3% average indexation. We believe that this is very consistent with our own expectations, considering our low OCRs. I am with you to say that when interest rates are so low, it is because there is probably an expectation that the economy will slow down.
If we look also at the typology of our portfolio and our geographies and so on, we still believe that this is a pace of growth that we can deliver going forward. After, I think it's very difficult to justify today this very significant premium, which is probably attributable because, well, I would say when we don't know where to put the blame on, we put it probably on the liquidity issue. It's probably a higher liquidity premium due to the lack of transaction. Again, we are lacking currently prime transaction into the market to give evidence that for prime asset with a yield at, let's say, 4%, they are still of an interest for investor in the current interest rate environment.
Understood. Thank you.
Thank you. I don't know if Bart, you are still on the line, we dig into the Q1 press release, the number for renewal and relet was EUR 3 million. We move from EUR 3 in Q1 to EUR 6 in H1. That was indicated. It was not as you indicated. It's EUR 3-EUR 6. Another question?
Yes. There is a question, I think, on the website about the more details on the disposal and what was the average yield. The average yield for the whole transaction is around 6.5%.
We don't disclose it country by country as requested into the question, because it comes mostly to one deal, and then we don't use to disclose on a deal per deal basis. Sorry. I think there is another question on the phone.
Yes, we do. Our next question comes from the line of Jaap Kuin from ING. Please go ahead with your question.
Hi, good morning. This is Jaap at ING. Just a question also on disposals. Appreciate you're disclosing the yield. Obviously, you're selling kind of the lower end of the portfolio at an average of EUR 2,500 per sq m, which is obviously way below the better part of your portfolio. I was just wondering if you could share your feelings on indeed the market for You said something about bigger assets, but also could you maybe share something on the feeling you get from potential buyers, for example, if they get into problems getting funding for some of the assets that they would like to buy, and if that could become a prohibitive factor going forward in closing deals with people who are dependent on secured funding, for example. Thank you very much.
Thank you for turning the question to us, because this is apparently a question that everybody wants to have an answer to. I think the investment market, it is as it is, okay? We have not seen large transactions recently, but in France, with the supermarket deals, it was quite a significant transaction with Casino.
Assets transacted, it's valid, so it's difficult to say why, and if there are buyers for that. We are not sellers of our prime assets. We are selling only non-core assets. We can only comment on what we are doing. I'm still, probably what my feeling is that when I look at the portfolio of Klépierre, this is not a proxy of the market. What we are selling, as you can see on the EUR 1 billion, is even if I will look not very modest, think this is far above in terms of quality of what you can see on the market, and which does not transact. The properties we are selling, whatever we think about it, whether we think it's core, non-core, they are good assets. They have strong cash flow, still some growth going forward. They are good in their catchment area.
We may like or dislike convenience malls or whatever, but they are good assets. I think my general comment on that is that the general quality, the overall quality of what we own, it's far above the market, and that's a big gap. The other, in terms of valuation and transaction, I think there is a lot of noises coming from the U.K. The problem of the U.K. is that they have declining NOI. We have growing NOI, and even for the non-core assets we are selling, they are not assets with declining NOI. That's the only comment I can do.
Okay, thanks.
Optimistic on continuing selling the assets that we have to finance our pipeline and to have better investment opportunities.
Okay, good. Maybe just to confirm then that you haven't heard any sounds from potential buyers of your assets, that they would have trouble getting funding in place to actually buy the assets you are selling?
No, all the transaction we have done has been funded. The last one is a Hungarian deal that will be closed by the end of the year, and I'm confident that the funding would not be an issue.
Okay, great. Thanks.
Let's meet when it is done.
Okay, thanks.
Thank you.
Take the question on the phone.
Thank you. Yes, our next question comes from Veraldo Michel from Société Générale. Please go ahead with your question.
Thank you for your presentation. I have two questions. The first question is about the buyers for your shopping malls. Can you tell us a bit more, who were the buyers for your 11 shopping centers for EUR 485 million that you mentioned? The second question is with respect to your shareholding. We've observed Simon Property increasing its stake at 21% and a reduction of APG. Can you comment upon this? Thank you.
Can I make my answer in English, or Okay. Your question on the disposal of the 11 malls to whom who sold these properties, and you want the identity. I think we are not going to do that, okay, one by one. As we said, there is a variety of buyers. It can be family offices, it can be small REITs, it can be different type of players. They are, most of the time, I would say, to characterize them, they are local guys, if I may say like this. In the Netherlands, we sell to Dutch, in Hungary, we sell to Hungarian, and in Portugal, we sell to Portuguese. Probably because they know better the market than the big institutional pockets that are still wondering, "Where are we going?" Very local, very knowledgeable people in their market.
For your second question about the shareholding of Klépierre, and Simon going up and APG going down, we have no comment to do that. We don't do that for any one of our shareholders.
Well, just to add on the call.
Next question for Cristiano Ozeano of AlphaValue.
Yes, good morning.
Yes, good morning. I have a series of short questions. The first with respect to Spain. How long will this significant reversion rate be sustainable? Second question, is it now time to accelerate the process of disposal in Spain, where the market is still very buoyant? I have more questions after that.
For the reversionary that we proceed in Spain, it is clear that when you do reversionary, starting with a two, that's a pretty high number. I think this reflects many things. Our properties are really doing very well in terms of sales. We are also catching up after a few years of recovery, and we have to remember that five years ago, Spain was in a different situation. I think there is also a cyclical effect to that. By definition, I would say it will not be like this forever. I think what is important when we look at the performance on a six-month basis is also to zoom out a little bit and look at the performance over a few years. That's probably what makes our company more resilient, is that we may benefit from the different macroeconomic cycles all over Europe, which are never synchronized.
Spain is doing very well, like Portugal and Central Europe. Some of the countries are a little bit weaker. I would say they are all positive, I have to say. If you look at five years ago, it was a different picture, and in five years' time, it would be also slightly different. The distribution of the growth of Klépierre may vary from a country to another on a five-year basis. It's difficult to say more details on that.
I deduct that Spain will not be your preferred focus area for disposals.
We have one strategy, which is to be financially disciplined. Okay. Our financial discipline means that we need to finance our pipeline and our CapEx with our cash flows, and the disposals comes on top of it, and we do the disposal with one main objective, is to refocus our capital to, I would say, the top 100 properties we own, step by step, so that we can reconcentrate our capital to the big countries where we are and the big cities, which is the vast majority of our portfolio. This is an ongoing process, and as you said, if you do it steadily and not in a rush, because you don't have a pressure to clear your balance sheet, you do it in a much better condition.
Once more, coming to the valuation, I think it also proves that the valuation we have in our books really takes into consideration this variety of the portfolio, and the yields are different between those type of assets and the others. When we go to the market, we hit the value, and we even do better. I think there is quite a good consistency, and that makes us confident to continue doing like this.
Okay, fine. Next question. On the future disposals, you are saying that you wanted to dispose of EUR 1.4 billion. There are EUR 900 more million to go. Will it lead you in the future to engage new share buyback programs, or will you stay with the EUR 400 million and the remaining EUR 900 million will be allocated more to de-leveraging rather than share buyback?
Differently. Okay. We don't have a specific program to dispose X billion of assets at some point of time. Some others, they do have this on their agenda, and we don't. Okay? We protect our company in order to never be in that situation. Okay? We are selling assets for refocusing and also to finance our pipeline. We do it when it comes. Okay? I think we have proven in the past that we are selling at good prices. We have no guidance whatsoever on the disposal plan. We do it, as we said, once more, every year, we review the cash flows, the CapEx that we want to spend to improve our properties, the development pipeline we are committed, and then we fix the financing for that.
I think there are some other question on the phone.
Yes, to finish with my question, it's a more philosophical question. On the change in regulations in Europe on REIT dividend payout rates, would it be desirable to start negotiating with the French and European authorities to reduce the obligations to pay our dividend as is mandatory, as is the case in France, considering what's coming up in the U.K., what's already happened in the U.S. with the suspended dividend payouts, with more difficulty for companies to pay them out. Is there a possibility to start engaging discussions with authorities in this respect?
Well, it's difficult for me to answer this question. We don't need to reduce our dividend payout, right? We are not in this logic. What is important to note here is that Klépierre is a company which has several tax regimes.
The primary tax regime is that of a SIIC, S-I-I-C. The French business in our portfolio accounts for only 37%. For those who are 100% SIIC-based or whatever-based, they have their own considerations. Changes in regulations, we, of course, scrutinize and monitor, but we don't want to make any more comment on what we'll be doing in the future.
Sorry, I think we have to move to another participant because we have a list of participants waiting on the phone. Sorry.
Thank you. As a reminder, if you would like to ask a question, please press star one on your telephone keypad. Our next question comes from the line of Nico Levicardi from ABN AMRO. Please go ahead with your question.
Good morning. Just a quick question as a follow-up for the disposals. I noticed that you managed to sell the Galleria Boulevard. I was just wondering, given that I had a chance to see the asset, which on a basis seemed to be half empty on a GLA basis. Do you actually use rental guarantees with some of these more challenging assets to sell them? If you can provide a bit more color on that one.
Which gallery are you referring to?
The Kristianstad one, the other one in Sweden or south of Sweden.
Not sold it, so no comment. The one which is in Sweden?
Yes.
Still own it. We are very happy to own it. We have not sold it, so no. We never give rental guarantees when we do disposal. We never do structured disposal. Okay. We do plain vanilla as is disposals. Because what we sell is good quality, good stuff, easy to understand. Kristianstad, not sold.
All right. Well, thank you for that.
In Kristianstad, we have sold an office building rights with four offices, which is probably what you are referring to, but it's EUR a couple of million.
Thanks for the answer.
We have lost Tom. Probably we are too long.
Thank you for your questions. At the moment, there are no further questions. Thank you.
Okay. Thank you very much for attending the call, and some of you we'll see later. We wish you good holidays with your family and see you soon. Thank you very much.
Thank you very much for joining this morning's conference call. You may now disconnect your line.