Montea (Euronext:MONT) Q1 2026 Earnings Call

0:00 Ladies and gentlemen, good morning, and thank you all for joining our Montea Q1 results presentation. The first quarter shows strong operational performance with April earnings up 6% per share, like for like rental growth of 2.7% and occupancy still at a very healthy 99.6%. We also signed or renewed around 30,000 square meters of leases at an average 20% rent uplift, which is not a bad way to start the year. Track twenty seven remains firmly on track with 88% of the targeted investment volume already secured, started or under exclusive negotiations supported by a disciplined balance sheet.

0:48 So in short, growth is moving, and the portfolio is almost fully led, and our space for growth is proving to be more than just a good tagline. As every trimester, I'm more than happy to present these results together with our CFO, Els, and with our Investor Relations, Inna. By the way, it's her birthday today. Else will start the presentation with our results, after which I will give a growth update. Ina will elaborate on the portfolio and market circumstances, after which Else will give an outlook, and I will close with our ESG targets. As every trimester after this presentation, the floor is open for your questions, which will be managed by Ina.

1:36 Els? Thank you very much, Jules. At prior results, the EPS went up by 66% year on year, driven by organic rental growth, income from acquisitions, pre led developments and green investments, and of course, thanks to our clear disciplined cost control. Looking into more detail into the figures. Net rental income went up by 12% to EUR 37,300,000 for the first quarter of twenty twenty six, driven by a strong like for like rental growth of 2.7%, entirely linked to rent indexation.

2:26 With property and overhead expenses going up by 11% to EUR 5,600,000, the operating result before portfolio results increased by 9% to EUR 31,800,000, leading to an operating margin of 85%, in line with last year's figure. The operating margin of the first quarter is always impacted by a seasonality effect, where the 100% of the charges that are linked to subscription tax but also linked to property insurance and property taxes that are not charged to our tenants, is taken in cost entirely in the first quarter, leading, of course, to a negative impact on the operating margin.

3:18 This effect will smooth out throughout the year and will fade away, leading to an operational margin target of 88% for this year. And of course, we reconfirm our 90% operating margin target for 2027. With financial charges and taxes going up, the EPRA result stands at €26,400,000 for the first quarter of twenty twenty six, an increase by 7% year on year and an EPS of EUR 1.13 per share, an increase by 6% year on year. The balance sheet of Montea remains prudent and solid with KPIs that will enable our further growth, a loan to value of 37.4 percent and adjusted net debt on EBITDA of 7.3x, an interest cover of 4.1x and an investment grade credit rating BBB plus with a stable outcome.

4:27 Looking at the liabilities and the financing cost, the cost of debt is under control with an average cost of debt of 2.2 percent, long term funding with an average remaining debt maturity at five point four years and an average remaining hedge maturity at five point one years. There's no debt that is maturing in 2026, and the total debt that needs to be refinanced in 2027 amounts to EUR 75,000,000 and is thus limited. Hedge ratio stands at 99.7%. Over to you, Jo, for the growth update. Thank you, Els. 70,000,000 has been invested over the first quarter, which means that 88% of our total investment volume target under Track 27 is now earmarked, leading to a portfolio of at least EUR 3,500,000,000 by the end of twenty twenty seven.

5:28 EUR 90,000,000 of direct yielding acquisitions will be signed and delivered in the upcoming months, all of them at a net initial yield above 6.5%, and the remaining EUR $380,000,000 of investments is fully covered under our available investment capacity within the 8x adjusted net EBITDA net debt on EBITDA limit. Looking at that EUR 70,000,000 today, you see that we are lagging behind compared to 2024 and 2025, which were two years with a lot of investments and developments. The ones that we earmarked now, as I said, have an average yield of 6.6%. And if we go into detail, we look into detail, we see that most of them are yielding acquisitions. So compared to the two previous years, there are less in house developments, but more yielding acquisitions are to come in the upcoming months.

6:31 And this is mainly linked to our very strong local network of experts. They are really able to earmark and to select good quality assets on core locations where we can add value and create value for the portfolio at, as I said, yields net initial yields above 6.5%. On the other hand, developments are rather muted. Pre lets are limited. We see that our clients, if they don't need to take a decision today, they prefer to delay. There is still a select appetite for large scale developments, but decisions are taking longer, and it's only on very core, core locations.

7:17 With the crisis in The Middle East, both transport and labor are becoming more expensive. So the search for core locations is only becoming stronger, which is in our advantage. If we look at the discussions we are having on the pre let or on the development portfolio, it's mainly driven by the e commerce sector today where there is still significant growth. Our assets under development, 54,000,000 today, with another EUR 5,000,000 in sustainability projects. The EUR 54,000,000, it's two projects. It's the project in Halle, in Belgium, that we are currently developing. And of course, our JV with Wirts for Skechers in Liege. 100% pre let. I cannot emphasize enough that it's 100% pre let.

8:07 And both of them have a twenty year lease duration on first break. When we look at our investments under exclusive negotiations, 111,000,000 are yielding investments, 26,000,000 is solar and batteries, and EUR 42,000,000 would be nonyielding land bank. And as I said, EUR 90,000,000 of that of direct yielding acquisitions, we expect to sign them in the upcoming months. Looking at the developments, 117,000 is currently under development, another 240,000 square meters we hope to bring into development, but only if we have pre let And the remaining land bank is another 1,200,000 square meters of GLA we will be able to develop in the upcoming years, which shows again that our land bank is the most crucial pillar of our future growth.

9:11 1,400,000 square meters of that land bank is yielding at an average yield of 5.9%, 1,200,000 is acquired but not yielding and another zero point eight million eight hundred thousand square meters is under option. The total market value of that portfolio is 500,000,000. And of course, if we bring that into development, we will have an additional growth after track 20 '7 of more than 70% of our annualized trend will come from that land bank, which will create another EUR $330,000,000 of value creation for the portfolio. This brings us to the portfolio update, where I give the floor to Ina. Ina?

10:03 Thank you so much, Jo. Looking at the lettings momentum within our portfolio, we can clearly see that the solid momentum continues. We've managed to relet 30,000 square meters and more importantly, at an average rent uplift of 20% and above ERV levels, once again underpinning the attractiveness of our portfolio, capturing reversion and further supporting our rental growth and the performance of our existing portfolio. As of today, 79% of our 12 of leases maturing in 2026 have already been extended or re let, which further continues to support and sustain our high occupancy rates at 99.6%, outperforming the market average by 500 basis points on average.

10:54 Looking at our portfolio, it has seen an increase of roughly €27,000,000 this quarter, rather limited in terms of investments in CapEx. However, our EPRA net initial yield stood at 4.9%, which reconfirms the valuation of our existing portfolio. And of course, with the expected deal signings that Jo has previously alluded to, we expect the portfolio growth to accelerate over the coming few months. In Q1, our portfolio saw a mild ERV growth, another quarter of that, while yields assumptions have remained stable. And overall, our portfolio offers a 7% reversionary potential.

11:40 It has slightly declined compared to the previous quarter, thanks to the capturing of our strong reversion and continuous like for like growth in the portfolio. If we look at the net reversionary yield today, it stands at 5.5%. Thinking about what drives the market today and especially in this current environment, we see that Western Europe remains a very, first and foremost, supply constrained market driven by the severe scarcity of land, lengthy and very complex permitting process and further exacerbated by the environmental and ESG linked hurdles as a result of further regulation.

12:26 Today, securing power and energy remains a very crucial element of attention for our tenants as well as ourselves. But these elements also continue to support the resilience of the assets and driving demand towards new stock and further potential in terms of growth. Looking at the demand drivers, specifically e commerce is certainly leading the pack. We also see our customers increasingly focusing at supply chain optimization, partly in part driven by the points that Jo has mentioned already linked to the cost evolution of both transport and labor, which pushes them to modernize and look for strategic existing new locations.

13:17 An additional driver is defense, which we believe will be more linked to the second tier effects of distribution around the defense. If we look at the latest forecast from ECDB in relation to the e commerce penetration, the story continues to be painted with a very clear picture, where we see the e commerce penetration increasing by four to seven percentage points in the next five years across all the markets where we are active. That creates a sizable 7,000,000 square meter new demand opportunity powered by the e commerce and would add a sizable incremental demand to the current market level take ups. Structural change impacting our markets is a big opportunity for logistics, and we certainly see a big driver of cost being within that.

14:13 And as a result, scale and consolidation strategies will continue improving operations and drive the demand for large distribution centers. Else, over to you for the outlook. Thank you very much, Ina. Let me first start by saying that we, Montea, are organizing an extraordinary general meeting later on this month, of May, to transit from a sole director structure to a one tier Board of Directors, aligning with the highest standards of corporate governance, aligning with the peers and aligned with best practice in Europe.

15:03 The transition from a sole director structure, meaning Montea management is the sole director and appoints reappoints directors, also approves changes in the Board of Directors currently will evolve towards a monistic Board of Directors where appointments and reappointments of directors are done directly through Montea NV and thus approved by the Montea NV shareholder. To ensure continuity, the current Board of Directors will remain the same and will be reappointed except for one change, which is Peter Snook, who will be replaced by his son, William Snook, as next generation representative, of course, alongside Derek de Pau, our Chairman, who will remain in his position.

16:05 Looking at the earnings and dividend guidance, we can reconfirm our 7% per year growth of the EPS and DPS, going to an EPS of €5.23 per share in 2026, including a potential EUR $0.08 FBI recognition for fiscal year 2024. For 2027, we reconfirm EUR 5.60 EPS. The guidance of EUR 026% is based on a minimum like for like rental growth of 2.5% and an investment volume target of €250,000,000 whereas the 2027 guidance is based on a €150,000,000 investment volume target. The remaining investment volume under Track 2027, which is €380,000,000 is fully covered by the available investment capacity within the limits of an adjusted net debt on EBITDA of 8x.

17:07 So Track 27 will be done through a disciplined financial allocation with focus on operational excellence, leading towards an operational margin of 90% by the end of twenty twenty seven, an average cost of debt that won't exceed to 2.5% and a consistently high occupancy rate above 98% throughout the whole period. Next to the organic growth. Montea will continue to focus on the four growth pillars, being the yielding standing investments that we will acquire, the in house developments, preferably pre let for 100%, minimum pre let for 50%, partnerships with landowners and developers as well as green investments, investments in solar panel energy and in battery energy storage systems.

18:02 Laying the groundwork for growth beyond Track 27, Montea has or will expect in the upcoming two years in France 500,000 square meter of GLA that is permitted, of which already 150,000 square meter is already secured today. Montea extends her track record of having a robust balance sheet with adjusted net debt on EBITDA and interest cover and a loan to value that is well under control and well managed. Supported by diversified and long term funding, 53% of the funding is provided by credit lines, 46% is coming from bonds with long term maturities, financing and hedging both above five years.

18:55 And maturities for both credit lines and bonds well spread over time with a cap of 20% of the total debt that needs to be refinanced within one year. Looking back at the last ten years, we have a proven track record with a total accounting return of, on average, 16%. Heading back to Yu Jo for the ESG update. Thank you, Els. A very short update. We invested €2,000,000 approximately over the last trimester, mainly in photovoltaic capacity, which went from 88 megawatts to 92 megawatts. And next to that, of course, we continue our growth program, both in heat pumps as in LED lighting in our existing portfolio.

19:47 But of course, given the fact that in house developments has been delayed, that also has an impact on new both photovoltaic projects as on battery storage. So a very limited update on that point. This being said, I think Montea remains an unmatched growth and success story with 215,000 square meters today in luck. We are developing the largest single tenant development in Belgium. We have a 99.6% occupancy rate, close to 100%, which is unmatched in our market. And of course, and I can't emphasize enough, 100% of the projects we do is pre let.

20:33 With this, I give the floor to Ina for the Q and A. Ina? Thank you very much, Jo. We'll now open the floor to your questions. You have two options to ask your questions. In case you're joining via the webcast option, please raise your hands. Our first question comes in from John Wong at Van Launschotte Launschutt Kempen. John, the floor is yours. Good morning. On your like for like rental growth of 2.7, you now mentioned that it is primarily driven by indexation.

21:19 But at the same time, you mentioned on the renewals of 30,000 square meters, you captured 20% rental uplift. So is it fair to say that the majority of the 80% renewed in 2026 were breaks? Or were there cases where you were unable to capture reversion? John, for the current perspective of the reversion evolution, so as you recall, we had a very active year last year where we captured a significant amount of rental uplifts as well. Part of it has to do with the quarter on quarter effects, and part of it is also within our underlying assumptions. We take into account a 2% indexation for this year, and 50 basis points is still assumed for the reversion. That's the guidance we have in terms of minimum like for like.

22:06 Of course, this quarter, we had a pretty exceptional leasing activity. And the volume is not high, but the uplifts were significant. So that will gradually feed into the like for like in the coming months as well. But a lot of these leases were, of course, signed towards the end of the quarter. Okay. That's clear. And on your acquisitions on the negotiation, I appreciate you can't provide too many details right now. But I'm trying to understand what you're targeting in terms of investments. Is it fair to assume that these potential deals have some sort of value add angle with a 6.5% or more than 6.5% yield on day one? And could you also confirm whether these are all new potential deals in Q1? Or whether part of it relates to the EUR 47,000,000 yielding investments that you had on the negotiation at the end of last year?

23:04 Thanks for that question, John. I think it is important to mention when we say we'll be closed in the upcoming months, it's because we are beyond the negotiation. They're actually an agreement between seller and us. It's just that they are still in the process of approval by municipality and approval by a port or an airport. So it's mainly linked to the fact that we are in administrative procedures there. So there's basically an agreement between parties on those deals. So we are very far in the process there. The fact that they are indeed at net initial yields above 6.5% means that they either have, as you said, a value at angle where we see potential, where we can develop or also because they are land leases and they are, as I already mentioned, ports, airports, where we are able, based on our network and based on our expertise, to achieve yields that are beyond the market or that are above the market today.

24:21 Our next question comes from Stephen Baumanns at ABN AMRO ODDO. Good morning, Stephen. The floor is yours. You target permits for zero five million GLA in France by end twenty seven. What are the concrete milestones for '26 regarding this, and what are the biggest risks to get the permits and leases in place for France? The largest part of that 500 will be already in '26. So you know that we have municipality elections. We had municipality elections in March. And based on those results, most of the permits will already be obtained in 2026. And I think, Inna, we already obtained over 100,000 150,000.

25:07 150,000 today. So most of the 500,000 will be obtained this year. Okay. Clear? Clear. And leasing? Well, it's zero because we haven't started the commercial process there yet With administrative procedures being very long, we think that you can only start the commercial process once you can also give certainty on the delays of delivery of a building. So there, we prefer to start the commercial process once we have the permits in place. Okay. Clear. And then a different question. So you assume 150,000,000 investments for your '27 targets. If I'm correct, are now what is it around 100,000,000 plus 90,000,000 materially rising soon?

26:02 Why would wolf 27 be weaker than, let's say, h one twenty six? Or is '1 150 just conservatism Or otherwise, are the current investments high, exceptionally high? The current the target for 2026 in terms of CapEx is $250,000,000 And as you know, where we are today, we provided the guidance on closing the additional EUR 90,000,000. Of course, we're in the first quarter of this year. For us, the goal is to execute that EUR $250,000,000 this year because that also and that is also driven by the directly yielding acquisitions, which will feed into our 2027 guidance as well. The EUR 150,000,000 CapEx target for 2027, If you recall, Stephen, we've adjusted our CapEx slightly downwards in terms of by about 50,000,060 million dollars in Q4.

27:02 As a because today, we don't see the need to allocate that volume. But more importantly, part of that CapEx was linked to the developments, which we have now in our internal budget assumptions have also pushed forward. So the guidance, I think what the main point is, the guidance today remains intact with us actually allocating less capital towards growth. And a big element of that has also been the support of the organic growth. We have our next question is from Friedrich Enard at Kepler.

27:49 Perhaps we can start with a question related to the Iran conflict. Has it put at risk any potential new lettings in our land bank or interrupted any discussions? Or is it just no interest in our land locations? No, no, absolutely. It has definitely had an impact, as I already mentioned. What we see in it in every country, companies that can postpone a decision that can delay, they delay. Mean, cannot forget that based on on the investment, the CapEx that needs to be done by our tenants in the buildings for automatization, robotization, mechanization, it sometimes even is bigger than the investment, the CapEx we do in the building ourselves.

28:36 And so for them, it's always a huge decision. And so what we see today is that if they can postpone, if they can delay the decision, they will delay it. And that's why today, the market is mainly driven in every market by e commerce and last mile because these are the sectors that are absolutely growing and where there is absolutely need for additional capacity. So this is absolutely delaying some of the decisions, but it's also, as I mentioned, it's also the reason why there is this huge difference in performance today between A locations and everything else and B and C locations is because there is this flight towards quality locations. So in our opinion, and that's what you see in the occupancy rate in our portfolio, this is also a flight towards quality.

29:25 But for new expansions, it's absolutely very much limited today to some 3PL, but mainly e commerce. Yes. Knowing that from an operational point of view, the need is there. It's mainly at the decision taker level where it's stopped, but we see more and more traction and leads ongoing over the last couple of weeks. An additional question from Fredrik. Is your LTV share price slowing you down in terms of acquisitions? Well, it raises the bars, of course.

30:11 It raises the bar because we are confronted with a discount on NTA today. And that, of course, makes us more selective. It's a good exercise for us. It's a healthy diet, I think. We have all known the years where we were spoiled by the premiums, where basically creating MTA could be done just by raising capital. That is now four years behind us. So if we want to grow, we have to be very disciplined, but it's a good exercise for our country teams. So yes, the bar is higher. That's why the 6.5% net initial yield is strong bar, is a difficult bar because the markets are performing well. And we all know that prime yields are below 5%.

30:58 That's the reason why we cannot buy prime assets. We have to develop them ourselves. So yes, it is definitely having an impact on strategy. But I think it's healthy. If somebody can grow and continue to deliver better results year on year in this market, well, that sets us ready for every market. And we need indeed that hurdle to be able to get to the EPS accretion, of course. On the other hand, we need to be more selective and also more creative on how to take control on deals. So it's definitely a good thing, and the creativity is definitely there. We need to see how to have control over certain acquisitions, land positions without immediately spending the money.

32:03 And the last question from Frederic is about detailing the 30,000 square meters of renewed leases and a 20% uplift, whether any CapEx was needed to capture that 20% uplift and what the average asset size is. But it's a mix. There were leases above 10,000 square meters. And in terms of any CapEx that was needed to be invested, it was very much in line with what we normally do if any was required. So it's ensuring that it's at least yielding from that perspective. Our next question is on the webcast line, and it comes from Viviane Macchiett, degroofb.com. Viviane, good morning. Please unmute yourself and go ahead.

32:51 Thanks for the presentation and happy birthday. Just a quick question on the €90,000,000 of acquisition. Any contribution in kind plans within these ones? I didn't hear. Whether we have contributions in kind planned within the 90,000,000 targeted acquisitions. I don't think we can elaborate on that, Inna. Indeed. Unfortunately, not, we cannot give more flavor on that. All right. Thank you. Thank you, Vivian. Our next question comes via the chat from Thomas at Deutsche Bank. Your activity on developments looks rather muted at the moment. While we hear more upbeat comments from your peers, what is your expectation for the full year?

33:41 Yes, that's, of course, the good question. I would say that's the $1,000,000 question. We are all waiting for those leases to be signed. What I can say is that in 2026, we have had opportunities. We have probably been very severe in the way that we did not want to give incentives at that time because we believe that qualitative land is only getting more scarce. So we didn't give in on our 100% pre let target. We didn't give in on our yielding target despite the fact that some of those developments were yielding well above 7%. So we have been very severe on that and because also we saw alternatives in yielding acquisitions.

34:32 So we didn't really want to give in on our quality nor on our lease expectations. It's a constant debate we have. There are leads, as Els already mentioned. Of our projects are not less than four prospects today that are hovering around the assets. So there are opportunities, definitely, but I will not be able to give you any flavor on that. We continue, and we have the ambition to bring them into development. But this being said, we also have we are well aware that these are very strategic locations, so we want to have the best tenant and at a reasonable rent level.

35:20 There is an additional question from Thomas with regards to the EUR 90,000,000 of targeted acquisitions. Could you provide some color as to the regions or ticket sizes? Ticket sizes, roughly $2,030,000,000. So let's say it's three to four assets that we want to acquire. And it's in all four of our markets, actually. So I cannot give you more flavor on that. There's one in France, there's one in Germany, one in Belgium and one in Holland. So it's really in every market that we are currently closing deals. And an additional question on the like for like rental growth expectations.

36:07 Our minimum is 2.5%. Considering stronger like for like in the first quarter and higher inflation expectations, there seems to be some tailwinds for higher momentum. Could you share your thoughts? Thomas, I think today, we assume in our budget, first and foremost, there is always a seasonality effect. So every quarter, we have a breakdown of indexation, and it links to a different starting point the year before. And today, of course, forecasts have been revised significantly. For us, the goal is to continue executing what we have promised under the Track 27, minimum 2.5%.

36:59 We expect that to continue throughout each quarter, but there is not much more to comment on that because the economic development remains rather volatile. So today, we remain at a comfortable point of setting our guidance where it was before. We have an additional question on the line from Kanat at Barclays. Kanat, good morning. The line is yours. Please unmute yourself. Hello. Thank you for taking my questions. Just one on me from me. Can you give some color beyond the 90 and the 111,000,000 of like, 111 obviously includes the 90,000,000?

37:49 So beyond the acquisitions that are in under discussion, So what are you seeing in the market if you were to top up the acquisitions going forward? Happy with this. The question was about the 90,000,000 of acquisitions we've communicated on, the 111,000,000 we have under exclusive negotiation and how do we see the evolution of those two and whether there is more to be added to? Yes. There's definitely more to be added. And the target for this year is EUR $250,000,000. We hope that some of that will come from the pre lets, from the in house developments. But as I already mentioned, a very significant part of that will come from the yielding acquisitions. So absolutely, the target for this year is well beyond the figure we gave you already. That's already under exclusive negotiations. So there's much more to come, definitely.

38:48 And those are hitting your yield targets? Yeah. Thanks. Thanks for that. The 6.5% yield target. Yes. Absolutely. Thank you for taking questions. Thank you, Kannad. Thank you, Kannad. It appears we don't have any additional questions on the line. So Jo, over to you for some concluding remarks. Okay. Thank you very much. It's not a surprise that some of the yielding acquisitions we were hoping to give you more flavor on them today that we would have been able to close the administrative procedures on these. They are a bit delayed, so we will have to wait a bit longer. But I can tell you that we will be able to close them in the upcoming months.

39:43 So looking forward to that. Thank you for your question. Thanks for your time. Looking forward to see you soon. Thanks. Thank you. Thank you.