7 May 2024 13:02
Price Sensitive

Results for first quarter 2024

Solid operating performances confirm the good health of IGD's shoppinh centers

  • Italian malls: retailers’ sales +2.1%; footfalls +2.6% (vs 1Q2023)
  • Net rental income: €31.1million (+7.1%; +6.5% like for like)
  • Funds from Operations (FFO): €3 million (-34.8%)

 

  • Disposal of a real estate portfolio finalized with net proceeds earmarked entirely for debt reduction
  • Loan to Value at 48.0%; Loan to value pro forma, including the impact of the disposal, 44.4%

 

 Bologna, 7 May 2024 Today the Board of Directors of IGD – Immobiliare Grande Distribuzione SIIQ S.p.A. (“IGD” or the “Company”) examined and approved the Interim financial report as at 31 March 2024 during a meeting chaired by Antonio Rizzi.

 

Message from the Chief Executive Officer, Roberto Zoia

“The positive results recorded in the first quarter of 2024 confirm the good health of our shopping centers” Roberto Zoia, IGD’s Chief Executive Officer, commented.  Due to the elevated cost of the most recent loans, attributable to higher interest rates, financial charges rose considerably which caused a decrease in Funds from Operations. The disposal finalized in April moves precisely in the direction of significantly reducing debt. This transaction marks an important step along the path we have undertaken to reduce overall financial debt, contain financial expenses and extend maturities, while also improving our core business, in order to create value for all the stakeholders. Toward this end, in the coming weeks we will begin work on a structured phase-in process with the aim of presenting the new Business Plan by the end of the year”.

 

OPERATING PERFORMANCES

 Italy

Consistent with the 2023 results, in the first three months of 2024 the malls continued to report solid operating performances: mall retailers’ sales rose +2.1%, while footfalls posted a higher increase of +2.6%. Looking at the performance of the different merchandise categories, all of them were higher with respect to the prior year, except for electronics which was down at the end of the quarter (-4.7%).

Occupancy for malls reached 94.2% at 31 March 2024, while average occupancy for the Italian portfolio (hyper + malls) came to 95.3%; both remained at high levels and stable with respect to 31 December 2023.

In the quarter 52 leases (which represent around 3% of the Group’s rent) were signed, comprising renewals (29) and turnover (23), with an average downside of -3.7%, explained mainly by the significant increases incorporated in rents in 2023 due to inflation indexing.

Rent collection reached approximately 91.5% in the first quarter of 2024.

 Romania

The occupancy rate at the Winmark malls remained high at 31 March 2024, coming in at 95.5% (the decrease of 70bps against year-end 2023 is due mainly to the exit of a tenant occupying around 600 square meters, for which pre-letting is already underway).

118 leases were signed, including renewals (69) and turnover (49), with an average upside of approximately +6.5% on rents (calculated on rents net of expenses).

Rent collection came to approximately 90% in the first quarter of 2024.

 

ECONOMIC-FINANCIAL RESULTS 

Rental income came to €36.2 million, an increase of 4.3% compared to the same period of the prior year. More in detail, this change is attributable to:

  • for around €1.1 million, higher revenues like-for-like in Italy. Malls were higher (+2.6%), due to the positive impact of inflation indexing and decreased discounts partially offset by a few turnovers, as were hypermarkets (+6.5%) due to inflation indexing;
  • for around €0.4 million, higher revenues not like-for-like explained primarily by the opening of Officine Storiche in Livorno in September 2023.

Net rental income amounted to €31.1 million, an increase of +7.1% compared to the same period of the prior year, while like-for-like the figure is +6.5% higher.

Core business Ebitda rose +6.6% to €28.6 million, with the EBITDA margin at 75.1%. The freehold margin (relative to freehold properties) reached 77.3%.

Financial charges amounted to -€18.5 million (+100.6%), while net of the accounting impact of IFRS 16 and non-recurring expenses they amounted to -€15.7 million, showing an increase of 82.7% compared to the same period of the prior year due to the higher average cost of the most recent loans.

Funds from Operations (FFO) reached €10.3 million, 34.8% lower with respect to 31 March 2023 due to the increased financial charges described above. 

 

ASSET MANAGEMENT

Investments amounted to around €4.1 million in the first quarter of 2024, explained mainly by capex in Italy (€3.7 mn) where work on the restyling of Centro Leonardo in Imola continues and fit-outs for the Primark store, which will open inside Officine Storiche in Livorno, were almost completed.

With regard to the Porta a Mare project 30 units in the residential section of Officine Storiche were sold and 5 more sales are expected to close over the next few months. Out of a total of 42 units, therefore, only 7 have yet to be sold.

 

DISPOSAL OF A REAL ESTATE PORTFOLIO FINALIZED

On 23 April 2024 IGD completed the final closing with Sixth Street and Starwood Capital (in execution of the preliminary agreement disclosed to the market on 23 February 2024) for the sale of a portfolio comprising 13 assets valued at €258 million, which generate net rental income of approximately €17 million per year.

The transaction was carried out through a closed-end real estate investment fund (an Italian REIF) called “Food Fund” established and managed by Prelios SGR S.p.A., into which IGD contributed the properties. Subsequent to the contribution, 60% of the fund units (class A shares with preferred returns) were sold by IGD to a Luxembourg vehicle (held 50% by Sixth Street and 50% by Starwood Capital) for €155 million. IGD maintained ownership of the remaining 40% (class B shares with subordinated returns).

The transaction’s net proceeds were used entirely to reduce the Group’s financial leverage which confirms  IGD’s commitment to accelerating repayment of the most onerous financial instruments. The Loan to Value pro forma at 31 March was lowered by 3.6 percentage points to 44.4%.

IGD also signed a contract with Prelios SGR to continue to manage the project, property & facility management activities across the entire portfolio with a view to further enhancing the portfolio over the next few years and selling it on the market at the best conditions possible. IGD will, therefore, also benefit for an estimated €2 million annualized from higher project, property & facility management revenue and lower operating costs. This mandate, together with the one granted by Savills for the “Juice” portfolio sold in 2021, confirms IGD’s ability to effectively manage third-party institutional assets which creates new business opportunities for the Company.

 

FINANCIAL STUCTURE

The average cost of debt reached 6.04% at the end of March 2024, significantly higher than the 3.86% recorded at year-end 2023, explained by the new loans obtained in 2023 and the new bond issued in November 2023. The interest cover ratio or ICR came to 1.8x. The Loan- to-Value reached 48.0%, in line with year-end 2022 (48.1%).

IGD decided, in fact, to use the proceeds of the transaction to:

  • partially redeem the “€310,006,000 Fixed Rate Step-up Notes due 17 May 2027” issued on 17 November 2023, for a nominal amount equal to €90 million, reducing the outstanding value from € 310 million to €220 million;
  • make a partial early repayment of the €250 million green secured loan signed in May 2023, for an amount equal to the ALA (allocated loan amount) of each mortgage property included in the sale perimeter and, therefore, for a total amount equal to €62.5 million;
  • make a partial early repayment of the €215 million green unsecured loan signed in August 2022 of €0.71 million.

 

It is also estimated that financial charges will decrease by around €5.3 million in the current year (annualized this positive impact reaches more than €11 million).