NSI, RESULTS : Half year 2021.

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Algemeen advies 14/07/2021 07:20
We are pleased to present our H1 2021 report. The key highlights are:

Occupational and investment market outlook improving, as Covid 19-induced slowdown abates
Significant step up in ambition with respect to ESG and future-proofing the portfolio
EPRA vacancy rate for H1 2021 at 7.7% (5.7% excluding strategic vacancy)
EPRA EPS for H1 2021 at € 1.16 per share, up € 0.01 vs H1 2020
EPRA NTA € 44.97 up +1.2% vs YE 2020; asset values up 0.8%
LTV at 32.6%, vs 29.2% at December 2020
EPRA EPS guidance increased to € 2.30 - € 2.35 for FY 2021
Interim dividend for H1 2021 maintained at € 1.04 per share

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With the coronavirus vaccination roll-out accelerating during the
quarter, confidence started to return in Q2. The expectation is that
this will translate in an improvement in business activity in H2.
We see this turn in sentiment already evidenced in a pick-up in
demand, with SME’s as active as ever. Whilst the larger corporates
are lagging, we see the first positive signs here as well. The pick-up
was too late to have a meaningful impact on our H1 vacancy rate,
but will help underpin our occupancy levels in the period ahead.
Key H1 activities & achievements
The vacancy rate has slightly improved in Q2 to 7.7%, of which
2.0% is deemed strategic. The vacancy rate for our HNK managed
offices reduced by 3.5% to 11.8% during H1. Meanwhile, the H1
retention rate of 79% highlights the resilience of our portfolio.
Like-for-like gross rents are up by 3.6%. Adjusting for a one-off
early lease termination payment received at Vitrum, and for the half
rent arrangement at Laanderpoort for 2021, the increase is 3.3%.
The rent collection rate for Q1 is 97.7%, with 99.5% for offices/HNK.
We have reached agreements with most retail tenants on arrears for
the forced closure period and so start with a clean slate in H2.
Asset values were up 0.8% in H1, even after the negative impact of
the increase in stamp duty by 2% per January 2021. In Amsterdam
asset values were up by 2.0%, whilst our office/lab-space assets in
Leiden were up by 5.5%. The revaluation of the € 80m acquisition
in March has already made up for the circa 9% acquisition costs.
We have reached several further milestones for our development
projects at Laanderpoort and Vivaldi III and are still on schedule
towards the projects starting in 2022. We recognise the inflationary
pressures on building material costs and as it stands, we are still
operating within the projected budgets for these developments.
We agreed a new 8-year € 50m USPP in June, at an all-in coupon
of 1.4%, which is an excellent sign of confidence in our business
and strategy by one of our financiers.
Establishing a future-proof office portfolio
The debate over the future of offices will continue for some time to
come, as corporates are moving from experimenting with WFH to
experimenting with hybrid working policies. An equilibrium will be
found at some point, but it is already clear that the debate is no
longer only about how much space will be required, but much more
about what type of space – in the broadest sense – will be needed.
Over the past 18 months corporates have seen confirmed what the
office is ultimately for: a great place for collaboration, identity and
culture, but also a place that helps to attract talent and caters for
their well-being. The latest Leesman data confirms that employees
most pleased with their existing office set-up are most looking
forward to go back to the office, which is a clear message to both
landlords and occupiers. Furthermore, with ESG much more on the
agenda everywhere, it is starting to become clear that corporates
will increasingly look for offices (and landlords) that will support
them in meeting their own wider corporate ESG agenda.
To stay ahead of this curve, being able to continue to offer what our customers require now and in the future, we are actively engaging
with our tenants to discuss their evolving needs, whilst improving
our portfolio score in terms of BREEAM (building sustainability),
WELL (human health), WiredScore (digital connectivity) and
Leesman (wider occupier satisfaction) standards.
Green premium vs brown discount
The minimum standard for our new developments (BREEAM
outstanding; WELL – at least gold) is also an ambition for our entire
portfolio, whereby we recognise that existing office stock generally
will be harder to upgrade.
We are convinced that not only there will be a ‘green premium’ for
the best, most sustainable and Well-certified assets, but there will
also be a ‘brown discount’ for assets that fall behind and that have
a prohibitively high cost in upgrading.
In recent years we made a very strong push to focus the portfolio
on a select number of economic growth locations and, whilst we
continue to see location as the most important driver to real estate
returns going forward, the future ‘green/brown’ divide will become
key to our further asset rotation plans from here.
Taking services to the next level
We established a Customer Excellence team in late 2019 to improve
our wider services offering. Ever since the team has reviewed and
updated our brand positioning, introduced a new brand manual,
remapped all customer journeys, introduced new SOPs (standard
operating procedures), updated our program of requirements and
signed new partnerships with a variety of service providers.
Some elements have already been introduced, such as bringing the
reception services at HNK in-house, upgrades in AV equipment to
facilitate better hybrid meetings and signing a new catering partner
to improve our F&B offering. We are now starting pilots to bring
together all elements of our ambition at Motion, Alexanderpoort
and HNK Scheepsvaartkwartier.

Outlook for 2021
Whilst it feels too early to consign coronavirus to history, we have
weathered the storm of the past 18 months or so rather well, which
we see as a testament to the strength of the business and the team.
With the economic outlook improving and our leasing activity now
picking up, we are raising our EPRA EPS guidance from € 2.25-
2.35 per share to € 2.30-2.35 per share for 2021. Further asset
rotation could potentially still impact this EPS guidance. Moreover,
we are confident we will be able to achieve like-for-like net rental
growth in excess of 1.5% for 2021.
Looking ahead, the transfer of Vitrum to the development pipeline
will mathematically result in a vacancy increase in Q3. The same is
bound to happen at Laanderpoort in 2022. Meanwhile, we continue
to further invest in our assets, in our development pipeline and look
for new profitable acquisitions.
All of this should further strengthen the business and its prospects.
As such we are entirely comfortable to continue to offer a stable
interim dividend, at € 1.04 per share, payable in early August.

Bernd Stahli

tijd 11.38
NSI EUR 37,05 +55ct vol. 9.970

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