Yes, let's kick off, I guess. Good afternoon, and welcome, everyone, a meeting with the MAS management team post their FY 'twenty one results. Just representing MAS, we have Martin Slabat, Irina Gregori, Dan Petrosor and Leon Allison. We also have the MASC Chairman on call, Werner Alberts. Just note, everyone will be muted, and the meeting is being recorded.
To ask a question, please use the chat box, Raise your hand or raise your hand and I can unmute you. Otherwise, I'll drop in my e mail address in the chat box, which you can also use. With that, I now hand over to Maarten and Irina. Thank you. Cheers.
Thank you, Ridwan. We have published an updated company profile and highlights of the results on the company website. Investors are encouraged to review these disclosures in detail. Irina and I will be speaking without referring to the presentation specifically, and we'll leave it and we'll take some questions after the presentation. The great set of results delivered for the 2021 financial year It's a consequence of a journey that started in 2016, which journey was accelerated from November 2019 when we took over the management of Maersk.
In 2016, when Maersk started investing in Central and Eastern Europe, It was a much smaller company with exposure to assets in Western Europe. By November 2019, approximately half Our significantly enlarged balance sheet was invested in Central and Eastern Europe in assets that experienced exceptional high growth In rentals since acquisition and with further high rental growth potential with the balance of the assets in Western Europe, Those investments in assets with very limited growth potential. The company has approximately 30 staff, Most doing accounting with all of its property and asset management outsourced to third parties. The Western European investments diluted the effect of the Central and Eastern European growth on earnings. We agreed to take on the management of Maas in November 2019 with the aim, overwhelmingly agreed to buy shareholders to transform Maersk into a company that, 1, has a CEE business only 2, has the ability to manage its investments in Central and Eastern Europe without reliance on third parties And 3, how's the capacity to grow this business?
Our ambition was to create a platform that would leave Maas in a position to deliver exceptional returns for shareholders and with the potential to significantly outperform its peers in the medium to long term. We thought that we would need 3 years to achieve this. I'm very proud to say that despite the challenges that COVID threw our way, we have achieved our objectives, and I'm confident that Victor and I are in a position to step down and hand over to a management team that has the know how and motivation to use the platform created for MAS to outperform its peers and deliver outstanding shareholders' returns over the next 5 years. I'm reminding you of what was achieved since November 2019. MASA's corporate structure was simplified and restructured for its Central and Eastern European focus.
Operations were streamlined. Prime Capital's former property and asset management team was integrated, And more staff was hired in Central and Eastern Europe with the result that Maas has more than 200 full time staff With a fully integrated in house asset and property management function, Masa's listed securities portfolio was restructured. To Most of Masa's Western European assets were disposed of, around €435,000,000 worth of All Masa Central and Eastern European properties As well as operational properties in DJV, we're certified as sustainable buildings, leaving Maaz very well positioned from an ESG investment ranking perspective. Maersk, despite its rate of small size, Obtained respectable in overall trade ratings from Moody's and Fitch and Maersk issued a SEK300 1,000,000 unsecured to 5 year Eurobond. All of this whilst we successfully navigated COVID.
The result is that Maas is liquid and has an existing asset base and Exposure to developments that should ensure provided that the consumption growth that we Our markets materializes to outperform in a spectacular way over the next few years. The company reinstituted dividends at 100% payout ratio and intends to maintain this for the foreseeable future. A note of caution, the pandemic is not yet over. It concerns us that vaccination rates in the group's markets are low compared to Western European averages. It is likely that further coronavirus related trading restrictions and social distancing measures Will be imposed over the course of the 2022 financial year, causing volatility potentially in short term results.
But we are ready for disruption, and we don't think that this will cause a change in dividend policy. Why do we say this? The business has returned to significant profitability With €104,000,000 of adjusted earnings for 2021 compared to last year's COVID induced €39,000,000 loss. We have effectively dealt with the COVID-nineteen fallout in our markets and in our business. In our main market, Romania, GDP per capita is higher than pre pandemic levels and consumption has recovered.
Most encouragingly, Tenants' turnovers at Masa's Romanian commercial assets have generally been higher than 2019 trading levels for the 6 months to 30 June 2021. Cash collection rates are satisfactory, and sales related to residential Developments in the DJV remain strong. Further COVID-nineteen disruptions are not expected to negatively impact longer term earnings targets. Here is what we aim to achieve over the next 5 years. Annual like for like net rental growth of at least 4% on Central and Eastern European Retail Assets From a normalized post COVID-nineteen base, improvement to occupancy rates for the current Central and Eastern European Retail Assets to 99%.
The completion in the DJV of commercial developments to the cost of approximately €600,000,000 at a weighted initial net yield of more than 9%. Residential sales and deliveries by the development joint venture of approximately €200,000,000 per annum By the 2026 financial year, at net after tax margin of approximately 20%. Over the course of the next two financial years, direct acquisitions of high quality Central and Eastern European based commercial assets to the value of at least €200,000,000 and An investment grade credit rating by the end of the 2026 financial year at the latest. These targets, including the investment grade credit rating, are achievable with the current capital base. In other words, without the need to issue more shares, while maintaining a full payout to shareholders of distributable earnings And maintaining our self imposed conservative debt limitations.
Despite distributable earnings and dividend payments to share growth not being our sole focus. As you recall, our sole focus is on total returns. We are aware it forms an integral part of maximizing shareholders returns and that is important to property investors. Achieving these targets should lead to the company generating significant and outstanding growth in annual distributable earnings and in dividends per share. Now I've spoken a lot about the future and this should not overshadow the very to the impressive results achieved during the 2021 financial year.
Irina will deal with this during the balance of the presentation. We hope to be introducing you, Rina, later in the year when we are able to travel again to South Africa. Thank you,
Rina. And thank you, Martin. Adjusted distributable earnings It's €0.0593 per share for the financial year. And tangible net Target value per share is of €1.24 per share. These were driven by 4 main items.
1st, continuing strong operational performance of retail properties in Central and Eastern Europe, Especially our Romanian Open Air Mall. As Romania was least affected by closures and restrictions, Combined with high rental and service charge collections within the context of the ongoing pandemic. To the second successful opening of a retail development during the pandemic. I'm talking about Stepzi Value Center in Spansugiorghe, Romania, during March 2021. This new center, as well as Dumbo Visma in Trgoviste, Romania, opened in August 2020, also during the pandemic, have continued to trade very well.
3rd, because of these operational performances, valuations of assets Have improved. Last, the group's restructured listed securities portfolio also performed well. The excellent progress with 2 strategically important matters weighed negatively on earnings for the period. This is the excellent progress with the sales in Western Europe and the bond issue. These two initiatives, even if their implementation weigh negatively on short term performance, Play a significant part in positioning the business for future growth.
From an operational perspective, [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] In CE, tenant sales improved by 7% compared to the same period in 2019 before the pandemic. This is significant. As usual, open air malls with a 12% increase The outstanding and enclosed malls was on par with 2019. Compared to the same period in 2020, Masa's CE tenant sales have improved by 23%. These improvements in sales compared to 2019 were achieved despite like for like footfall in CE being 85% to the portfolio in 2019.
Collection were 98% of invoices. I know that Narsi's initiative to also publish a pro form a collection rate seems to confuse them. I remind you that the pro form a collection rate compares the 98% collection of invoices [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] To what invoices would have been if we were not in a pandemic. Due to COVID, We have granted waivers and discounts to struggling tenants. If you compare the impact on GLA published on Page 4 of the company profile, which is available on our website.
To pro form a collection rate, you will notice a strong correlation. The excellent 87% pro form a collection rate achieved simply represents the business cash collection as compared to pre pandemic rental entitlements. In other words, it shows the short term disruption to the business in terms of cash collections. You should not be confused with the 98% collection rate, which is best in class. We are very encouraged As well, with rent reversions being positive.
On €2,700,000 worth of contract expiries, New base rent levels have improved by 1.2%. Rent reversion remained positive throughout the pandemic, Wealth occupancy remained stable. Maas had access to more than 424,000,000 Euro in liquidity, at 30th June 20 21. This is an extremely well positioned for the company.
Perfect. Thanks, team. I'm going to start with some questions and then open it up to the floor. Great. So just from my side, just to get the
ball rolling,
occupancy of 93.2% reported. How has it improved since the letting of sepsi and Dumpovitamor since June? How has that in performing. And has there been any improvement in the occupancy level?
Who's taking that question? Is it Renaud or not?
I will. So In terms of occupancy, we have a very clear asset management plan to improve occupancy in the medium term up to 99 Thanks. Yes.
I think, Rickoit, it's also important To keep in mind that I think there are 2 areas as far as the improvement of occupancy is concerned. The first is that they are low hanging fruit. You will recall that we're in the process of refurbishing the moor in Alba Yuliya, and that is the asset with lowest occupancy. It's below 90%. The other is that so the moment the refurbishment completes, which is expected by October this year, We would expect occupancy to improve there, and that will improve occupancy, obviously, in the rest of the portfolio.
As far as developments are concerned, developments will have lower occupancy for the time being in the leisure Segment of the business because that is the area that is that was most affected by the pandemic to date. So As we get out of the pandemic and leisure tennis start to trade better, which is really the case, we expect that I can see in the new developments also will also follow-up.
Perfect. And then I'm guessing the next question will be around tenant sales. Are you seeing the rate of growth as sustainable in the next 3 months given what we perceive possibly as pent up demand? Or do you think that can be flowing through into the first half of twenty twenty two.
Well, it's hard to say, and I'll let my colleagues jump in. So consumption is as we covered the pre pandemic levels in our markets, so and GDP is higher than what it was pre pandemic. We do expect high growth in our markets. This is why we have retail assets, and this is also why we're doing residential developments. We haven't seen a slowdown In July August, so the same trading patterns that we observed from May when all of our centers opened and people became Used to moving more freely has been the case since then.
We can also mention that since June, There haven't been any fixed lockdowns in our market so far. So we haven't seen evidence of declining sales.
And then with regards to operations in Bulgaria, I see the collection rates there have lagged other regions. Any reason as to why and possibly a recovery soon?
Just a Sure. Clarification first. I think you may be referring to the pro form a collection rate. As I mentioned a bit earlier, we track Two indicators. First is the cash collection rate, which refers to collections of invoice trends And pro form a collection rates, which is a performance indicator during the pandemic.
This pro form a collection rate The reviews or measures The impact of waivers discounts granted to tenants during the pandemic. So our pro form a collection rate of 87%, and I believe that what you are referring to as well in respect of Bulgaria encompasses the strict lockdowns that
In fact, Ritwan, if you and the readers or the viewers, shall we say, of this broadcast Look at Page 4 of the company results. You will notice that we show the impact on trading as an impact on GLA at the top of the slide, And then we show the pro form a collection rate at the bottom. And you'll notice that there's a very strong correlation between trading restrictions And the pro form a collection rate. So you will notice, for instance, that when we had loads of closures, for instance, in April, The open gel, the unrestricted open gel was around 82%. And at that point, the pro form a collection rate went to about 80%.
So really, what happens is the pro form a collection rate at full collection just basically shows you to what extent the GLA was affected by the pandemic restrictions.
And then one more question from me. Regarding the disposal program, which has been successful or extremely successful, Firstly, who's been the buyers of these assets as well as the premium to book that you guys achieved? Does that not bring into account maybe the Do you think the valuations of your current European assets are conservative?
Thank you, Ridwan. No, we do not think they're conservative. What we think happened is the fact that the Western European disposal process was I mean, the disposals were a result of a very well structured disposal process, combined with Very favorable monetary policy from the European Institutions. In respect Of the buyers of these assets, these are varied. It ranges from large institutions to even private individuals for some of the smaller assets.
And then, Dan, if If you look at the assets that are remaining on the book, potential to sell those assets, if you have to provide some time frame, what you're looking at?
So we have a few left. What we can say is that we have asset management initiatives For Flansburg Gallery, and we hope to I mean, we are starting these initiatives. But however, to Flansburg Gallery will be sold opportunistically even before these initiatives are finalized. And what we can also Mentioned is the fact that the Adagie Hotel in Edinburgh, Scotland will go on the market in September, Considering the fact that Scotland is moving out of the out of pandemic restrictions.
And then just a follow-up question on the disposal. So at the moment, you've got about €27,000,000 of realization costs that are estimated. It's reduced by about €25,000,000 Do you see further reduction in that number?
It really depends on how successful the initiatives are On Flensburg and also it depends on what pricing in estimation I mean, what pricing we can achieve on the hotel in Scotland. However, I think that that number is our quite accurate and is our Best estimates considering the information we have now.
Perfect. I see we have a hand up by Alexandre. You can unmute your mic.
Hello. Hi, can you hear me?
Yes.
Hey, thank you very much for the presentation and congrats for these results, really impressive despite these tough times, unfortunately. I had a few questions. I just wanted to reclarify in terms of the assets you have for disposal. How much is that roughly about €200,000,000 which is left to be sold? Is it like Mainly the Western European assets or it's less or more?
And the 100 go ahead, sorry.
As of 30th June, we did indeed have EUR 231 €1,000,000 worth of Western European assets. To date, one of those properties worth €85 million has already been completed. It had been contracted to be sold prior to 30th June, and we are now left only with 7,000,000 worth of assets, meaning the Flenswear Gallery asset, the Adagio Hotel, a small retail asset in Germany and Two pieces of land in U. K.
Yes, Page 17 of the presentation makes it quite clear, and there are detailed notes there that the property was The contract to be sold at the end of the financial year hasn't, in the meantime, been transferred. So you can see the information there in detail.
Got it. Thanks so much. So the cash is not on balance sheet yet at €85,000,000 Got it.
Not on 30 June, yes.
Got it. Yes. And the loans you have, are they mainly related to Western European assets? Or are they secured on that and therefore, they will go away once you sell these assets? Or no, they are related to other?
Yes.
So the only secured loans that we have left at 30th June, I refer to Western European assets Within March, and there is some secured loans in respect of the development joint venture. So if you are referring to our Proportionate accounts, there is just some secured debt on the JV side. Other than that, Bonds proceeds are unclear.
And that proportional debt would be like around €30,000,000 €40,000,000 not more than that, no?
Well, it's in the numbers. On the 31st June 2021, you'll see liabilities in the DJV of DKK12.4 million, that Massive 40% of the liabilities.
Fantastic. And sorry, just a last accounting question on that front. I see that on your balance sheet, you consolidated the full preference shares you have, like The full $247,000,000 while in the presentation, you only show 60% of that even though you own 100% of these preference shares. Why is that?
Because MAS also owns 40% of the development joint venture. So MAS owns 40% of The ordinary share capital of the development joint venture, however, provides 100% of the preference shares.
To void double counting.
Yes, on consolidation, we only see 60% of the preferred shares. On consolidation, on a proportionate basis. On IFRS, you will see 100%.
But in terms of economic benefit, you have the full preference shares. You own the full preference shares, and you also have 40%.
Yes.
So isn't it a bit conservative to only show the 60% on the presentation?
Well, it's an accounting matter. If you proportionally consolidate, you Would eliminate on consolidation 40% of the assets of the vehicle in which you invested because you have 40% of the ordinary shares. If you look at from an IFRS perspective, the equity account for Tiaonia showed a net position. This is all accounting. Economically, You're absolutely right.
Maersk has 100% of the benefit of the preference shares and 40% of the ordinary shares After the preference shares has been taken into account from economic perspective.
Last question, and then I'll leave it to the other investors. So you're having a lot of cash on balance sheet. Can you give us a feel about what's your acquisition timeline? How much you think you're likely to spend in the next like 12 to 24 months? And how does and what's your leverage strategy?
How fast you think your leverage is likely to increase? What are the Key parameters, which you used to
Well,
Maybe I should respond to that question. We have a few things to take into consideration. Obviously, From an efficiency perspective, we would like to invest cash as soon as possible, provided that we invested in sensible assets That we're convinced we can get good growth out of. We also want to grow the balance sheet to investment grade status As soon as we can. So that's another pressure point from an investment perspective.
But at the same time, given that we're still in quite uncertain times, We're not rushing unnecessarily. We've set ourselves a target to invest at least €150,000,000 this financial year, which we're in at the moment. But if we find and we are looking at many, many potential Acquisitions, if we find better acquisitions or more acquisitions, we will invest more and faster.
Great. And in terms of leverage, what's your I know you want to get to the high grade. You want to grow significantly, but To which extent are you willing to take more leverage?
We're very conservative when it comes to debt. We have a self imposed Limitation, we don't want to have debt in excess of 7x net rental income Or in excess of 40% on an LTV basis. And we will strictly keep to those limits, and we wouldn't move I don't think we will We wouldn't want to get too close to those limitations.
Got it. Thanks a lot. Thanks, Alexandre. Next question from Jarrod Houston on the chat. Given the opportunity set, to why move to 100 percent payout ratio.
We understand that our investors I've been keen for the dividend. We wanted to thank them for their patience. We had initially We refused to pay dividends for a while until we were in a position to ensure that Mas was able to Cover its liabilities. We have since managed to achieve quite a lot of Objectives and even more so during the last financial year. And we believe that we or the Board has believed that this to be And the most appropriate method of rewarding our shareholders for their patience.
Yes. I mean, let me add to that. There are a number of considerations, and there will always be debate around this issue. And we appreciated our many different views. We are able to achieve all of our objectives with the current capital base and whilst maintaining a full payout.
So if that's the case, Unless there are compelling other investments, we would be inclined to distribute a dividend. We will not hesitate, I think this is important to note, to prep the dividend If we consider it necessary, if we think that our ability to achieve an investment grade credit rating is at risk, If we think that there are very good investment opportunities that we cannot otherwise fund by, for instance, selling lower performing assets Or taking on more debt within our self imposed gearing limitations, then we will also consider cutting dividends. Another potential possibility is if the share price reduces significantly, we may use Distributable income to buy back shares.
And talking about buying back Cheers, looking at your listed portfolio, the allocation to Nephew Rock Castle, what's the reason behind that instead of buying back Mann Shares?
I think considering our target of achieving an investment grade rating and basically growing our asset base, It's always an option to also buy back shares, but also we need to consider reducing the dividend in this case. Considering the investment case on Nepia and considering the results that it As produced, we have we believe this was the best use of the capital. You're right, man.
I think it's important that we're saying that it's not one or the that We think that share buybacks, shrinking the balance sheet whilst we're in the process of Attempting to get to investment grade credit rating is not an option. We can't shrink the balance sheet at this point. And if we're going to do this, we will do it with money that is earmarked for distributions, but not money that's earmarked for investment.
And the investment in Nepe Rockcastle, for now, it's just you're getting a better return in a listed stock. That money potentially would be earmarked for developments going forward, am I right?
Yes. The share price of Nepiroc Castle at the The time when we decided to acquire shares, we thought it was very attractive relative to the set of facts that we that was available to us. I mean, I don't think that we are saying that we should look as to how well the investment did with hindsight. That's not relevant. But at the time, given what we knew about our markets and the trading in our markets, we thought that the shares were very attractively priced.
Consequently, it made sense for us to acquire the shares at the time whilst we were selling down the Unibuilding and Klepierre shares that we owned.
And then just coming back to the cash on the balance sheet, euros 291,000,000, It's a large amount. I'm guessing it's after the ratio of the 5 year bond. But what was the reason for issuing the bond before being investment grade? What's the thinking behind this given the strong balance sheet Maersk already has?
So This is a question of who came first, whether the chicken or the egg. We did need access to debt capital markets In order to achieve scale. And the bond market was in a good Place, when we decided to issue the bonds, it provided us with the opportunity to do so even prior to being investment grade. We need to be mindful of the fact that in CEE, the secured bank debt market is quite limited, and It is very competitive, let's say. And Access to additional capital on the debt capital markets provide us with easier access to other sources of Financing in order to achieve growth targets.
Yes, I mean, I can only reiterate this, that access to debt, even at conservative Levels is important to both scale, and bank debt markets in Central and Eastern Europe are just Too fragmented and too small for us to be building scale, relying on secured finance.
And then coming back to the talks of acquisitions, board target of €150,000,000 in 2022. Maarten, our previous discussion we had at the previous results was a lot of capital in the region. Opportunities weren't as many. As environment change, let's say, on the time frame to deploy this capital, at what yields? Can you give us some insight into that?
Well, you've asked me I don't think that it's in our interest to discuss Our thinking around acquisitions in a public forum because it certainly will there's not any investors that dial into these calls. So we prefer to keep our thinking around investments and pricing to ourselves.
But there is opportunities that you guys are seeing.
We're not going to answer the question.
And on the residential sales, euros 200,000,000 per annum of residential sales by 2026 achievable. Can you talk to us about the residential market in Eastern Europe?
Yes, we wouldn't target something that we don't believe is achievable. We also don't target things that are not ambitious. So it's certainly not a walk in the park, but we've set out on course to build a substantial residential business 4 years ago. We've made good progress. We'll be delivering our first units in the next few months, so we're very excited about that.
And we've got to 2 other projects under construction now as well with some added pipeline, and there's probably more to come from a pipeline perspective. It's important, again, to mention that this is an incremental approach. So our development approach in the development vehicle is not to have Commitments to construct things that we're having to start a construction, so we essentially have options on land. And we have the ability to phase and carry on with constructions as our sales are progressing. So we'll manage risk from that perspective carefully.
And it's a build to sell model, not a build to rent, am I right?
Correct. It's involved in our model. We think it's this is the trend in our market.
And then Peter, just touching on the residential question again, maybe you can To add to it, could you perhaps share your latest views on the size of the residential development opportunity over the next 5 to 10 years? Or maybe to ask differently, will Maaz become a residential fund?
Maaz DASM develop residential property, first of all.
Yes, I think there are a few things there. Maersk is an investor in a development vehicle, Funding vehicle, which is jointly owned with Prime Capital. Maersk is now a developer. Maersk is also a fund. It's The company that manages its assets, but that's a fine point.
I don't want to put too fine a point on it. So Maas is not a developer. The development vehicle is 1, and I think that there is an enormous opportunity potentially for residential development in our part of the world. We have 20,000,000 people, a lot of old communist buildings that and a population with growing income And growing consumption power that is looking to upgrade and improve the living spaces. So there is quite an opportunity, but you're quite right, residential development It's not the same as commercial development.
It's also not the same as managing commercial assets. These are different disciplines and require different specializations.
Good morning, Morvan. Interesting question here. Regarding the 3 year mandate, Just can you explain why I'm stepping down in March rather than in November 2022? Werner is online. So if Werner needs to to answer.
Just unmute the mic.
This is appropriate for the Chairman to answer this question.
Yes. Good afternoon And to everybody, and it's great to be part of a presentation where such good results are being presented. Regarding the question, when we brought Maarten and Victor and there was a very clear mandate to help to restructure our group in line with the new strategy. Despite all the challenges we've had with COVID, They've absolutely excelled and delivered this much sooner than what we anticipated. So by and large, The work that we needed them to help us reset the group's strategy has now been done.
At the same time, they've also been incredible in building a succession line of management that can drive the business forward. We've taken all of this into account together with concerns that they have been from time to Regarding the conflicts of interest that may arise and despite the way the board is managing it very effectively, It is always something that we take into account. So taking into account that they've, by and large, fulfilled on their mandate And that we have good strong management in place now, the board felt it appropriate to accelerate the plans. Martin still has a lot to do between now and the end of March, but we are confident that we will have the right management in place By the time that Martin wants to move and focus back more on to the prime capital duties.
And then Werner, with regards to the disposal of the European the remaining Western European assets, given that Martin is looking to step down in March, Do you see any risk in those disposals? Or how has the Board thought about those?
Fortunately, we're not dependent on Maarten alone for that disposal process. There is an incredibly strong team that deals with it. That team Gives regular feedback to the board. So we don't see risk linked to the acceleration of the Succession plans.
And then with regards to the exclusivity arrangement, Now that Victor and Martin are stepping down to Prime Capital and Maers have an exclusivity arrangement regarding developments and acquisitions going forward?
Nothing has changed in that regard.
And just to remind the shareholders and guys on the call at the moment. Exclusive agreement is still in place.
The development joint venture agreement, which predated the November 2019 transaction, included an [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Preciviti clause between Maas and Prime Capital until 2025. That has not changed as following the transaction And we'll not change following the stepping down of Martin and Victor.
And then with regards to management having shares in Maersk, can they now sell the consideration in shares?
So none of those arrangements have been changed?
Yes. I mean, let me remind you then. So there was a lockup That applies to the shares that we issued in November of 2019, a 3 year lockup. That doesn't change. So the fact that we are Brigte stepping off the board as an executive now, and I will step off as an executive, say, by March of next year, doesn't impact the
And in fact, you might have noticed in announcements during the year that They've actually invested more in the group. So it's certainly not a concern that they are running away.
No, in fact, slightly nervous. No, I'm kidding. We're very And our colleagues, we know each other very well, and We're confident that the team of more than 200 people, that our managing asset management team are superb, And I'll be the best team in our part of the world. So we're happy investors and looking forward to great returns In the years to come.
And then with regards to the cost to the new management or because I remember initially, Martin, you're working for free. How will that impact the cost structure of the business going forward?
Well, they're in the cost structure anyway. So there's not we're not adding anybody. And we had, in any event, a succession plan. So it's not like The new executives could step in only at the end of the period when Victor and I would have left originally in November of next year. So we don't think there's any additional cost as such.
And in the previous announcement, Martin, With you stepping down potentially being if requested to be a Board member, is that still in play, whether Nonintech for Chairman.
Maarten will most certainly be invited to remain as a Non Executive Director, And that's not changing.
Well, Martin accept.
Yes, of course, I will. Until the shareholders feel that I should rather not be in the board because of potential conflicts of interest. That's kidding. I'm kidding. Probably not a problem.
Yes. And then with regards to mass buying assets or A question coming through with regards to Maaz buying assets. Will that be out of the DJV or within Maaz's balance sheet?
Well, if Mark acquires properties, we'll Search for most appropriate acquisition targets in order to maximize shareholder value. Of course, the DJV itself is subject to a different governance structure. So Mark may approach the DJV management to attempt to acquire some of their assets. Should there not be sufficient acquisition targets on the market?
Yes, I think it's important we've made this point Before and perhaps I'll make the point anyway. So there's no question Of management of Maersk deciding to do one thing, to do something rather in the DJV. It's not how the Structure is set up. The DJV is a separate vehicle with its ungoverned structure. And Maersk and the DJV take decisions independent of each [SPEAKER JACQUES VAN
DEN BROEK:] Maas is an investment in the DJV.
The DJV is set up primarily to develop assets. It isn't able to acquire assets Also for redevelopment purposes. But as you would have noted, and now I'm Speaking not I'm speaking not on behalf of the BHV, but given The announcement as to what the targets are for developments in the DJV, euros 600,000,000 worth of commercial developments at cost plus Residential sales to the value of around €200,000,000 per annum by 2026. I think one could conclude from that safely that the intention is to use the capital of the DJV for development purposes.
On the chat box, Alexandra asking a few more questions. Why did receivables increase so much in the second half of twenty twenty one?
I will answer that, of course. When we look at receivables on a On a portion basis, we will see quite fast where the increase comes from. So I would like to remind that by 31 December 2020, March had Agreed on a number of share purchase agreements for sales of Western European assets. A significant part Of the increase in receivables refers to receivables due to transactions completed to 30 June 2021, mostly in respect of U. K.
Properties, Langley and North Spit Corner, Part of which will be collected at a later date.
So some of those U. K. Properties in simpler non accounted language We sold in installments, and there are payments that are still due on those sales.
And then with regards to NRI, it's Been a bit weaker in the second half compared to the first. Why is that? And then shall we expect some softening going forward on the recovery or recovery?
In total, NRI would have decreased in the 2nd part of the year due to the fact The transactions which have been concluded prior to December have completed in The 6 month period to 30th June. So we would be missing some of the NRI coming from Western European assets that have been disposed during
Yes. I think you should expect you should look at I mean, what I would advise shareholders To do is have a look at the proportion of accounts, you would expect that net rental income in CEE will continue to grow. It also has been the case in the last 6 months if you compare 6 months to 6 months results. Net rental income in Central Eastern Europe is up. That's a combination of improved rental income.
We have noted that passing rent increased. And on top of this, there are developments that completed, so that will continue to be the case. Western Europe will phase out eventually to 0 in the next 2 years As the other as the rest of the business grows.
I have seen the comments as well in respect of like Like net of disposals and so on. So we would have seen as well that The second part of the financial year has been affected by stricter lockdowns in Poland and Bulgaria, this has an effect on actual NRI,
of course.
Question from Simon, what would Maes' tax rate be on a normalized basis?
I'm not sure I understand the question, what Tax rate on a normalized basis mean there are detailed notes
in the
financial statements calculating the effective tax rate of the group. I suggest you have a look there. Exactly.
And with regards to the timing of the preference sheet roll down, What's your thinking around that? Or maybe can you give us a sense of how you will deploy capital if you see acquisitions and developments? Is it Firstly, you're listed in the portfolio. Is
it cash?
So from We have a commitment to the DJB to invest in preference shares as and when the DJB requested. This is limited to BRL 120,000,000 on a 12 months basis. So as and when the DJV requests additional funding through preference shares, the MAS is Committed to offer this. So we do keep this in mind when we do our cash management, of course, but It is not Mas' prerogative to discuss how the DJV Invest that capital once it has.
Sure. And if you could give us some timing or to an amount that's Expected to be drawdown in the next year?
So it would be a maximum of EUR 120,000,000.
Where do you see leverage moving to in 2021? Moving to 2022, I guess, FY 'twenty two.
That would be dependent on our successful acquisition program, of course. But We would be seeing a decrease in a further an even further decrease in LTV, which effectively now to Today, it would be having reached 4% from 13% with the completion of new Beer House asset. This would further decrease as and when we fell down on On remaining Western European assets and as we deploy capital, We would see the investment property increasing, therefore, the leverage increasing as well.
What is the reason for the reduced margin on the residential developments? Is there further risk to the downside?
Well, first, there isn't any reduced margin on the residential developments. I presume what happens is The person that asked the question read that we have a 20% minimum after tax target for Edential Development, which compares to the development pipeline margin figures, which are pretax. So that could be the reason for the question. But no, the answer is we're not expecting a reduction in margin. The 20% net after tax margin is the minimum margin that we Thank you, Chief with Residential Development.
Can you talk about the Silk District development? It has been on hold for a while now, but I see permitting has been approved. How is tenant demand developing, especially within the office
So when COVID became part of our reality in March of last year, we put the office development on hold, And we focused on the residential development for Salk District. In the meantime, we're working on permitting, which came significantly later than what we It's been quite a frustrating process from a permitting perspective, but that's part of the development business. We have the ability on that side to do 100% residential or mixed use, in other words, part residential and part office. The residential demand is exceptionally strong. We had more than 300 reservations even before we got the permitting, and we opened sales Only in late February this year.
So only since late February were clients able to make reservations. And as I said, we have more than 300 Residential sales reservations by Dutton. And we started converting those to sales contracts post permitting. You've seen more than 180 contracts have been converted from reservations to actual firm sales contracts in the meantime. We will be speaking to office tenants in the months to come.
We're not in a particular rush to Start the office development. If there's demand at acceptable levels, we will do some office development. If there isn't, We will simply fill the site with residential development, which is ample demand for.
With regards to reaching a target of being investment grade rated by 2026, Besides size, what are the other major criteria that you need to meet?
Size is the main criteria that needs to be met. As long as we keep our very strong operational covenants in check as well as our Strong balance sheet position and liquidity profile as it currently and even less than it currently is. Achieving the size target should be sufficient. So the size target is USD 2,000,000 $2,000,000,000 whereas we are now at €1,300,000,000
Yes. So just to add to that, 2026 is the longest. In In other words, we want to get there before 2/26 if we're able to do that. We want to get there by 2026 latest. That is the target that we put out.
And just to get to the $2,000,000,000 besides the Board's target of €150,000,000 in 2022. You still need to devote another additional about €150,000,000 to €200,000,000 of acquisitions. Are you seeing that many opportunities in CEE? Because if you're selling There's
a combination of factors This which gets you to EUR 2,000,000,000 sorry, EUR 2,000,000,000
balance sheet.
This includes completed developments of commercial assets As well as the current assets, as well as acquisitions as well as the growth in asset values that you achieve over the period depending on I'll successfully manage the assets and I'll successfully pick acquisitions. We think that if we achieve The targets that have been set out over this period, the combination of those factors or a different combination We'll lead us to a balance sheet the size of around $2,000,000,000 by that point at the latest. If there's slower growth We have fewer acquisitions or we don't secure the developments that we're looking for, if we won't achieve that, and then we'll have to acquire more assets. So like any other thing, this is the surgery. These are the targets.
And as our Circumstances change, we may have to adopt our strategy accordingly.
And what is your current What is the current shareholding of PKM Associates in Maersk?
So Prime Capital And its associates.
Prime Capital and its associates, yes.
Including the Development Joint Venture and Prime Capital Shareholders. That would be around 21% of mass. And this is, As mentioned by our Chairman earlier, bodes well for the future as one of our most significant shareholders is They're also very invested in the business.
A follow-up question on that. Would you be increasing that yield?
That is not something that I can
know. Yes. We could ask the same question of many shareholders at this meeting. I don't think this is an appropriate subject for discussion at the presentation.
And then just a few on the chat. Would you also be raising a new bond in 2022 in case you see more acquisition opportunities?
It is a possibility, yes.
And Martin already answered the question by mentioning that circumstances So we will adapt to circumstances.
And then last question, what is the minimum liquidity you would keep on the balance Tito.
So we would keep sufficient amounts of liquidity, both in on the balance sheet as well as Off balance sheet through unsecured committed facilities in order to cover existing liabilities And any commitments to the DJI?
Perfect. Thanks. It doesn't seem we have any more questions. I think you can looking at the time, we can end it. So Thank you to the MES management team, and thank you to all those that have dialed in.
Enjoy the rest of your day.
Thank you, Everyone, thank you.
Thank you.
Thank you for the time. Bye bye.