Eurocommercial Properties N.V. (OTC:EUCMF) Q4 2021 Earnings Conference Call March 25, 2022 6:00 AM ET
Company Participants
Evert Jan van Garderen – CEO
Roberto Fraticelli – CFO
Peter Mills – CIO
Conference Call Participants
Steven Boumans – ABN ODDO
Operator
Hello and welcome to the Eurocommercial Properties Full-Year Annual Results 2021. Please note this conference is being recorded, and for the duration of the call your lines will be on listen-only. However, you will have the opportunity to ask questions at the end of the presentation. [Operator Instructions]
I will now hand over to your host, Evert Jan van Garderen, Chief Executive Officer, to begin today’s conference. Thank you.
Evert Jan van Garderen
Good morning, everyone, and thank you for joining us this morning. I’m happy to be on this call with Roberto Fraticelli, our CFO; and Peter Mills, our CIO, to present Eurocommercial’s results for the year 2021. After my introduction, Peter Mills will talk in more detail about the property portfolio and ESG, followed by Roberto Fraticelli who will discuss in more detail the financial results. I will start with an overview of the operations of Eurocommercial during the financial year 2021 and we will finish this presentation later with some remarks on the dividend proposal and the new dividend policy. We then open the call for any questions and suggestions you may have.
Operationally, the business in 2021 can be split more or less in two halves. And whereas the first half of 2021 was still significantly impacted by COVID-19, we are pleased to report that the second half of 2021 showed a strong operational performance. Diversification over four countries and the quality of the EUR4 billion retail property portfolio have again been key to the performance of the company during 2021. After the sales of properties announced today, the new weightings are as follows: Belgium 15%, France 21%, Sweden 23% and Italy 41%.
Our suburban shopping centers focused on everyday goods and anchored by hypermarkets and supermarkets, showed strong resilience. 62% of the space in these shopping centers is dedicated to essential and everyday goods. Our five flagship centers have more exposure to discretionary retail due to their different function, but still have 41% exposure to essential and everyday goods.
Due to lockdown orders from governments, our shopping centers have been closed several times in three of the four geographies where we operate our shopping centers. Only Sweden has seen some restrictions but no closures. On averag,e our centers have been closed for three months in 2021, and the graph provides a good overview of what happened since the start of the pandemic in respect of lockdowns, footfall numbers, and sales in our shops. In the second half of 2021, there was full recovery in retail sales after the centers reopened, albeit on a slightly reduced footfall.
The retail sales in the second half of 2021 have been very strong when compared to the previous year, but also when compared to 2019, as the overall turnover of the shops in the portfolio was 1.4% better. Sweden was the star with plus 14% compared to 2020 and plus 5.7% compared to 2019. Also, Italy, with 41% weighting in the portfolio, scored remarkably well with a plus of 39% compared to 2020 and flat compared to 2019. We were very encouraged by the latest available turnover numbers in our stores, which are the February 2022 numbers, showing even an overall increase of 2.7% for the portfolio compared to the same months’ pre-pandemic levels of 2019.
If we look at the various sectors and compare 2021 turnovers to 2019 we see some clear winners, which are the hypermarkets and supermarkets, but also gifts and jewelry, sports and home goods, health and beauty, telecom and electrical also fully recovered to pre-pandemic levels. Clearly, food and beverage still had more difficult circumstances during the second half of 2020 due to restrictions, including the face mask, limiting opening hours and the health pass.
Despite the 2021 pandemic, it was another active leasing year. We are still well positioned to lease our retail space to attractive tenants on sustainable conditions at affordable rent levels. Introducing new tenants and new concepts of existing tenants will ensure that our shopping centers remain attractive for the customers and continue to have their purpose and stay relevant in their catchments. We are proud to be able to report that on 264 relettings and renewals, last year there was 277, but still more than the 245 in 2019, an average rental uplift of 5.1% was achieved. As you can see from the bar chart, the uplift on the renewals and relettings varies over time. But over a 10-year period, we are still in very positive territory. The volatility is very much the result of which lease transactions are concluded in which period.
The country breakdown shows the usual pattern that in Belgium and Sweden we have more renewals and relettings than in France and Italy, which is explained by the average length of the leases and tenant break options. It is important to note that the leasing activity did not slow down during 2021 and that we were able to attract new tenants with our 100 new lettings achieving an uplift of 7.2%. These new deals were concluded under normal lease conditions and terms. So no need for short-term leases or extraordinary concessions. This leasing activity is continuing. We have already 61 new leases signed as from January 1 until to date.
Over the past years, the word indexation was hardly mentioned as indexation was very low and barely contributed to rental growth. They started changing since the summer of 2021, and we now see material indexation appearing again. Although the indexation rates differ among our countries, the 2022 average indexation for the entire portfolio is assessed at 3.6%. In Italy, the indexation was 3.8% and both for France and Sweden it’s 2.8%. For Belgium, it’s a bit more difficult to calculate the indexation for 2022, as every month those leases which started in that particular month are indexed using the index for that month.
This being the case, we will only know what the indexation invoice was by the end of the year. Therefore, we used an estimate of 5.6%, having regard to the average for the first three months of 2022 which was 6.4%, and the expectations about what the index to be used will be for the rest of 2022. The indexation is expected to contribute to the rental income for 2022 for an amount of around $7 million. And as the occupancy cost ratios for our tenants are low for the sector, on average around 10%, the rents will remain affordable also including the indexation. For Sweden, the indexation has already been invoiced and collected, and in France and Italy most of the billing is taking place in the second quarter of 2022.
Low vacancy is usually a good indicator for the quality of the portfolio. Over the last 10 years, we have reported vacancy rates for our property portfolio ranging between 0.5% and 1.6%. The EPRA vacancy rate remained very low at 1.5% in December 2021 for the entire portfolio. For France, the rate was slightly higher than the portfolio average, but since December a number of new lettings, particularly for some larger units, have been achieved. So we expect the vacancy rate in France to improve in the first half of 2022.
Our leasing and rent collection teams have again been extremely busy in 2021 with the execution of our strategy for the lockdown periods, which was to find mutually acceptable solutions for rent payments and the rent concessions for the lockdown periods only and to keep the existing leasing agreements unchanged. This strategy resulted in very high rent collection rates for Belgium and Sweden. And we are pleased to report that for 2021, we have already collected 96% of the invoiced rents in Belgium and 98% in Sweden. In Italy, we also had a good score, taking into account long lockdown periods in that country. Of the due in collectible rents, 98% is collected, meaning that we have nearly finished all negotiations on the remaining outstanding amount with tenants.
For France, we report a lower collection rate, which is due to the complicated French government support package for tenants for the third COVID-19 wave and the time it will take before tenants receive their money from the government. Upon receipt, the tenants, then have 12 months to pay their rent to the landlord. This obviously slows down the collection of rent outstanding for the months of March, April and May 2021.
In our interim report for the first six months of 2021, we reported a total amount for rent concessions for 2021 of EUR14 million, which is about 6% of the annual portfolio rent. We are currently reporting an amount of EUR13 million as we have now finalized most of the negotiations with tenants and the granted amount was slightly lower than the amount assessed in the summer. On the map, you can see that Eurocommercial owns two of the three largest shopping centers in the Milan area. We own Carosello and 50% of Fiordaliso. The other 50% of Fiordaliso is owned by our joint venture partner, Gruppo Finiper, who also owns IL Centro, the largest shopping center in the north of the Milan area. If you look at their locations and their retail offer, you can understand why we call Carosello and Fiordaliso flagship shopping centers.
Last year, we presented our largest shopping center in Gigli as a nice example of our leasing activities. This year, we will discuss the remerchandising of the shopping center Fiordaliso in Milan as a nice example of our leasing activity. The redevelopment and re-merchandising of Fiordaliso started in 2018 when the Finiper hypermarket firstly reduced in size, allowing the renovation of the East Mall. Part of the first phase, which was completed on time for Christmas 2019 included the opening of a new Primark, the relocation in the center of an enlarged H&M and an enlargedOVS, plus the reconfiguration of a Media World store. The second phase, which started at the end of 2020, saw the remodeling of the eastern entrance with 10 newly refurbished units and the subsequent repositioning of the hypermarket to the outside, although still connected to the shopping center through the eastern entrance.
In the third phase, the vacant former hypermarket was demolished and partly converted into a new multi-level car park and partly converted into 7,000 square meters of 10 new shops, which opened in November 2021 for new retailers, including Adidas, Hollister, New Yorker, Game 7, while JD Sport and Bershka relocated to new enlarged stores. The fourth and final phase has recently started and involves the refurbishment of 2,500 square meter food court with the addition of six new pre-let restaurants, including wagamama, Mexican restaurant Calavera, and craft brewery restaurant Viescho Spirito, scheduled to be completed by the end of the summer of 2022.
The works will also include the refurbishment of the remainder of the mall, thereby completing Fiordaliso retail offer and re-confirming it as the dominant regional shopping center to the south of Milan with a total of 150 stores. Part of the whole process of re-merchandising of the center includes also the entrance of new retailers who have committed to Fiordaliso success. Sephora, which will take unit previously occupied by JD Sport, Signor Vino, which will take the unit previously occupied by the small Bershka, and completing the restaurants offer by Piazza Italia, which has already taken the unit of Risto’s free flow restaurant, strengthening also the Media World Piazza, and finally, Miniso, a Japanese inspired lifestyle product retailer offering high quality household goods, cosmetics and food at affordable prices.
Finally, also Apple consolidated its position in the center, refurbishing each store and enlarging it by taking 150 square meter extra space. The project success can be seen by Fiordaliso’s outstanding performance during 2021 when footfall was 6.1% higher than in the pre-pandemic 2019, and 70% of this footfall was realized in the second half of 2021, in particular, October and November showed strong growth figures due to the opening of the new part in the mall.
And this is the moment to hand over to Peter Mills who will discuss in more detail our property portfolio and will report on our environmental, social and governance strategy and performance.
Peter Mills
Thank you, Evert Jan. Overall, the valuations increased by 0.8% since the properties were last independently valued in June and slightly decreased by 0.3% over the 12 months. Generally, the six-month valuation increase resulted from stable or even marginally higher initial yields or exit yields depending on valuation methodology, applied to higher net operating income, resulting from the rental uplifts achieved on the renewals and re-lettings, and higher than anticipated indexation. The overall EPRA net initial yield on the portfolio increased from 5% to 5.1%, and in their reporting the valuers generally identified the low vacancy levels in the portfolio and solid income supported by steady tenant demand and rent affordability, with the OCRs reassuringly remaining at around the low pre-pandemic levels.
In Belgium, the value of Woluwe shopping declined by 0.6% over six months, mainly due to a slight downward correction in ERVs and a more conservative approach to the future extension. In France, where our valuations were more or less flat over six months, the overall EPRA net initial yield remains at 5%, although it is worth noting that excluding the prime mixed-use Central Paris asset, Passage du Havre, with its low initial yield of only 3.7%, the yield on the remaining predominantly suburban and provincial hypermarket anchored shopping centers is 5.4%.
In Italy, the overall EPRA net initial yield was slightly up at 5.4%, the valuations increased by 1.4% over six months resulting from higher income, particularly generated from the three Italian flagships, I Gigli, Fiordaliso and Carosello, which together are valued at a net initial yield of 5.1% with the remaining five smaller hypermarket-anchored shopping centers valued at 6%.
In Sweden, the valuations increased by 1.4% over six months, again, mainly as a result of higher net operating income, with the overall net initial yield remaining at 5%. The Swedish valuers were able to refer to a range of shopping center transactions at the end of last year, including Solna Centrum, Vasby and Balsta Centrum all completing its net yields of 5% or just below.
We have again provided a valuation split separating our five flagship shopping centers, which are illustrated here grouped together. These flagships increasingly attract a broad international tenant base as we have just seen in the re-merchandising slide on Fiordaliso which follows similar re-merchandising as I Gigli that we presented last year. These assets, representing 45% of the portfolio, are much larger with an average value of over EUR400 million and a lower yielding at around 4.7%.
The remaining 20, mainly suburban hypermarket anchored shopping centers, have different and more defensive characteristics with over 60% of their floor space devoted to a broad range of essential and everyday retail, including groceries and a range of services supporting them or local communities. These assets comprise 55% of the portfolio. They are much smaller with an average value of around EUR100 million, and are higher-yielding at 5.4% overall.
During 2021, the company completed the sale of Les Trois Dauphins, Grenoble, its city center mixed-use investment to the Credit Agricole Group for a price of EUR34.4 million. This was followed in December by the sale of Chasse Sud, the Geant hypermarket anchored retail park located south of Lyon for a price of EUR80 million. In addition, this year we have already agreed and today announced two further sales. On Tuesday, we completed the sale of Les Grands Hommes, Bordeaux for a price of EUR22.5 million. Then yesterday, we sold the 50% ownership of the office and residential parts of Passage du Havre in Central Pari,s together with two smaller adjoining buildings to our joint venture partner AXA for a price of EUR57 million. The company will remain the asset manager and owner of 50% of the retail gallery in the main building of Passage du Havre with its GLA of around 14,000 square meters, including the main anchor, Fnac, and around 40 tenants.
These sales form the final parts of the company’s EUR200 million disposal program announced in August 2020, including the sales at the end of that year of its only other two standalone retail parks in the portfolio, both located in Sweden at Moraberg outside Sodertalje and Bronsen in Norrkoping. The sale of its small mixed-use properties in Grenoble and Bordeaux, where asset management initiatives and re-merchandising have been completed, leaves the company with a more homogeneous shopping center portfolio in its four markets, and is also consistent with the decision to sell its non-retail holding in Passage du Havre.
On the acquisition side, last November, saw the company completing the purchase from its joint venture partner AXA of their 50% share in Shopping Etrembieres at a price of EUR45 million. Together with nearby Val Thoiry, this purchase increases our exposure to this important and wealthy region of France, right next to the Swiss border and Geneva.
Our ESG and business strategies remain carefully aligned, so that business decisions can be approached with a more long-term view in order to evaluate both their environmental and social-economic impact and the future demands and expectations of our customers, tenants and employees. Our approach is articulated around these three strategic pillars shown on the slide; be green, be engaged, be responsible.
Be green forms the foundation of our operations and provides us with the opportunity to make changes that will reduce our imprint and operational costs as we focus on the transition to a low-carbon economy with the target to operate carbon-neutral by 2030. To reduce our carbon emissions, we have set a reduction target for our Scope one and two emissions to be zero by 2030. To achieve this, we have developed a carbon pathway and we continue to improve the environmental quality of our shopping centers by implementing standards and technologies to improve energy and water efficiency and waste recycling. This includes reducing energy consumption, procuring renewable electricity and where possible, generating energy onsite through further solar panel installations, rock heating and ground water heating and cooling. We are investigating how to reduce our Scope 3 emissions and will set a reduction target on those carbon emissions.
During 2021, we updated our Green Lease documentation following constructive collaboration with our tenants with whom we exchange ESG ambitions, targets and responsibilities. As part of its environmental policy, the company uses the comprehensive range of environmental criteria incorporated in the BREEAM certification process in order to standardize and improve the sustainable quality of its buildings and their management. In February this year, we completed our Initial Certification Program with all our shopping centers being BREEAM certified three years ahead of the original target date of 2025.
During this year, we also initiated our sustainable finance program, closing three years sustainability-linked loans and later sustainably-linked interest rate swap contracts, all containing sustainability KPIs.
We remain fully engaged with our customers and tenants and our shopping centers continue to form an integral part of their local communities, bringing improved social and environmental values. The company have established and in 2021 further expanded the Eurocommercial Retail Academy, illustrated on this slide, working together with our retailers to improve sales technique and customer service and therefore, the overall shopping experience. The Retail Academy is already well established in all seven Swedish shopping centers and the 3,600 staff employed within. The response has been very positive among participants and we have received equally positive feedback on the program and its content from central management of many of the retail companies. The academy is therefore being rolled out in Italy and France with the objective to have it fully established in at least 15 shopping centers by the end of 2023.
Also last year, despite the difficulties arising from COVID-19, we have undertaken several further engagement surveys with our customers with improving satisfaction scores while introducing net promoter scores in order to more closely monitor customer satisfaction. This year tenant surveys in every shopping centers are scheduled following early postponement due to the pandemic. We launched job portals in almost all our shopping centers last year, to promote local employment opportunities. At Fiordaliso, we ran the Generation Italy program with Intesa, San Paolo, to assist young people to find employment through training and education. And in Woluwe Shopping, pictured here, the center organizes and supports a program to identify and encourage young entrepreneurial talent who can establish small-scale businesses to broaden their experience and commercial education.
I’ve already mentioned the BREEAM certification program illustrated on this slide, which also shows other ESG performance awards in 2021, including the EPRA Gold Award for sustainability reporting for an eighth consecutive year. The company achieved its highes- ever score of 84 in the 2021 GRESB assessment, a continuous improvement from previous years and an increase of 21 points since 2018. This result is both above the GRESB average and our peer group average, and as a result, Eurocommercial maintained its Green Star status for the eightth consecutive year receiving four GRESB stars in 2021.
And I will now hand over to Roberto Fraticelli for the financial review.
Roberto Fraticelli
Thanks, Peter. Hello everybody. Let’s start with the numbers. Okay. This slide that you will see shortly, yes, this gives you a quick overview of the most important financial data. You see the total net borrowings at December decreased slightly to EUR1.68 billion from the EUR1.77 billion in 2020, and you can also see that loans are spread among 15 – more than 15 different banks with a particular concentration, that’s around 30% for the Dutch, the Germans, and Italian banks. In April, we closed a three-year sustainability-linked loan, like Peter mentioned, for a total amount of EUR100 million with ABN AMRO on two properties in Italy. And in May, we entered into sustainability-linked revolving credit facilities with ING for an amount of EUR25 million.
March, so this month, we also signed a new five-year loan of EUR66.5 million with ING to refinance two existing loans on the Curno Shopping Centre in Italy, which was expiring – were expiring in April 2022. The new loan qualifies as a green loan as the relevant proceeds will be used to refinance Curno, which is a green asset, and also as a sustainability-linked loan as the margins is linked to two sustainability KPIs at Group level and two at asset level. And the average term of the loan book, as you can see, it’s almost four years with monthly repayments, which are foreseen in the year 2025 and 2026. Also, the overall interest rates, including margins, was 2% compared to 1.9% in December, and 82% of interest costs are hedged, mostly by interest rate swaps, but also by a number of fixed interest coupon loans. And you see that also the average interest rate swap hedging term is almost six years.
If we go then to the next slide, our fantastic loan to value. Yeah, the loan to value ratio, which is calculated on the basis of proportionally consolidated balance sheet as per December 31 after reducing purchasers’ costs decreased to 42.3% compared to December when it was 43.8% in 2020. For comparison purposes, our loan to value ratio adding back purchasers’ costs as per December 31, 2021, was 41.2% and our loan to value ratio, adding back purchasers’ costs and using the IFRS consolidated balance sheet was 40.1%.
There you can see the decline. We need to remember that the Group covenant ratio – loan to value ratio agreed with those financing bank is 60%. Also, what is important to note, this is the last part, so the loan to value ratio considering the completed sales of Les Grands Hommes and the 50% of the residential and office parts of Passage Du Havre further reduced to 40.5% on a proportional consolidated basis. Here for comparison purposes, this loan to value ratio, adding back purchasers’ cost goes down to 39.5% and adding back purchasers’ cost and using the IFRS consolidated balance sheet, reduced to 38.3%. So we have therefore reached our goal of 40% loan to value, and a big thanks to our team, they made it possible.
If we go further, we go see the direct result. We’re trying to give you some good overview on what’s happened in comparison to the previous year. So as you can see, the direct investment results on proportional consolidated basis for the 12 months in 2021 decreased slightly to EUR110.6 million compared to the EUR112 million for 2020. The main reason being the EUR14.1 million COVID rent concessions to retailers, of which EUR5.3 million straight-line rent concessions under IFRS 16 and a conservative bad debt provision for an amount of EUR4.4 million, the residual future rent concessions, which still need to be straight-lined as a result of the application of IFRS 16. You may remember that was Italy mainly is EUR7 million.
The lower net property income of EUR3.7 million compared to 2020, deriving from the asset disposal program, was partially compensated by higher rental income of the properties. You see it EUR1.7 million up, and the lower net interest expenses, EUR1.6 million. The relative increase in corporate income tax is mainly related to higher corporate tax in Sweden, the relative increase in property expenses is mainly related to an extraordinary correction in the personnel cost, which took place in 2020. If we exclude the above-mentioned correction, the costs remain in line with the years 2020 and 2019.
Finally, to enable better comparison of the results, we extrapolate in the overview the impact of the COVID-19 measures on our direct result. As you can see, the relative impact of COVID release is positive plus EUR2.1 million and that is mainly due to the fact that notwithstanding the rent concessions given in 2020, were nominally higher, EUR24 million compared to 2021. Part of the rent concessions given in 2020 has to be straight-lined according to IFRS 16. This implies a lower impact on the 2020 accounts and higher due to the straight-lining impact on the 2021 account.
And then finally, EPRA NTA, this is the last slide coming – coming, yes. That gives you a quick look at the relative change in the EPRA NTA, where depositary receipts from the EUR40.1 at the end of 2020 to the current EUR40.1. The two major movements besides, of course, the direct and indirect results are the dividend of EUR0.50 per share, which was paid out in July. The increase in the number of shares which you might remember, it was 5.6% related to the scrip dividend. And the variance of EUR0.8 related to the negative adjustments of the fair value of the financial instruments.
And with that, thank you very much, and I’ll hand over to Evert Jan.
Evert Jan van Garderen
Thank you, Roberto, for presenting all these figures. In the press release, we included the dividend proposal, which we will table at the General Meeting scheduled for Tuesday, June 14, 2022 for approval by the shareholders. The last time the company paid a dividend was on July 2, 2021. Due to the uncertainty caused by the COVID-19 pandemic, the shareholders approved a reduced cash dividend of EUR0.50 per share and a dividend in shares of one new share for every existing 18 shares. The dividend in shares ensured that the company will maintain its status as a fiscal investment institution in the Netherlands, the FBI, and its fiscal SIIC status in France.
For the financial year 2021, the dividend to be distributed by Eurocommercial in accordance with the FBI rules and the SIIC rules is just above EUR100 million. Such distribution can be made either in cash or in shares or a combination thereof. As the last of the COVID-19 restrictions in our four countries have already been or are about to be lifted by the respective governments as from May 1 at the latest and we believe we have left the period of rent concession behind us, we propose to increase the cash dividend to EUR1.50 per share and to pay a mandatory scrip dividend of one new share for every 75 existing shares to ensure that the company is complying with its fiscal dividend distribution obligation. The total cash dividend amounts to EUR78.2 million and the distribution in scrip dividend amounts to EUR22.3 million.
The company has been well known for its stable to increasing dividend policy since its inception in 1991 and the Management Board and Supervisory Board believe it is now appropriate to introduce a new dividend policy for the company. Just before the pandemic started, the company had announced to introduce an interim dividend next to a final dividend, but then had to postpone the implementation of this policy due to the lockdowns impacting the business of the company. We believe that we can now announce that we will pursue this policy of an interim and a final dividend, it means that in January 2023, there will be the first interim dividend with a final dividend paid in July 2023.
For the interim dividend, we aim to pay around 40% of the total cash dividend paid in the previous financial year. We also believe that it is in the best interest of stakeholders that the new dividend policy has a clear payout ratio range and also the payout ratio target for cash dividend, which many of our peers already have. The company’s payout ratio for cash dividends will range between 65% and 85% of the direct investment result, but with a target of 75%. A mandatory scrip dividend may still be distributed if that is necessary to maintain the company’s FBI and SIIC status.
Although the uncertainties caused by the COVID-19 pandemic are now behind us, unfortunately, these have rapidly been replaced by new uncertainties due to the horrible war in Ukraine and the related geopolitical tensions. The impact on energy prices and supply of goods and in general on economies is very unclear and makes it difficult to determine the outlook. Today, the company’s results are not directly affected by the war in Ukraine and the sanctions against Russia, but that could change would the conflict escalate. However, the indirect impact on the company’s results is far from clear.
Consumer spending could start to subdue, some major international tenants may be hit in their businesses. For example, in the supply of goods and energy and construction costs could increase further and for longer periods of time. We, therefore, have to remain cautious and propose to pay a cash dividend of EUR1.50, which is at the lower end of the new payout ratio range. The ex-dividend date will be Thursday, June 16, 2022, and the dividend payment date will be Friday, July 1, 2022.
I would like to conclude this presentation with a statement that as Management Board, we are truly thankful to all our teams in the various countries for their hard work and their continuing commitment to our company. And I will now hand over to the operator for questions.
Question-and-Answer Session
Operator
[Operator Instructions] The first question comes from the line of Steven Boumans of ABN ODDO. Please go ahead.
Steven Boumans
Hi. Good morning. Thank you for taking my questions, of course. Maybe first to start with indexation, do you expect to be able to fully price through the indexation that you mentioned? And maybe second to that, could you please remind us whether there are any caps on the indexation going forward?
Evert Jan van Garderen
Yes, Steven. Now thank you for this question. Of course, as I said in my opening remarks, indexation was a word which was not really part of our vocabulary for quite some years but it’s back and quite strongly, as you can see. We were able to put in a table in our press release because we were slightly later presenting the results than our peers, and therefore, these indexation figures were available. So far, yes, we think we can indeed receive the indexation, which is now clear from the figures we have and it’s of course under the contract it’s something which we can invoice and therefore we are entitled to that as a landlord. A good example is Sweden. I mean that’s already done and in the field – in the bank, as we can say. For the other countries, France, Italy, it’s happening soon, mostly in April. We don’t have any signs that that should immediately be a problem.
Of course, remember, we have had a low OCR. OCR is still a metric, which is not that easy to determine for longer periods. I mean, we can probably now look back for, say, 10 months in a bit more normal situation that you can start measuring OCRs again. But we’ve always had relatively low OCRs in the portfolio and that is, of course, helping us in this indexation. It’s probably a bit more difficult to say what will happen in Belgium, because obviously there we have every month a number of contracts, which we will then index according to the applicable index for that month. So that’s something you can probably see later on in the year. But so far the signs we have is that it should all be collectible.
And in terms of your second question, are there any caps, in the portfolio overall, there are no caps, there are maybe a few contracts where there is some sort of cap there, but normally the indexation is not capped. And also, there is no regulation that could sometimes be the case in a certain jurisdiction that there is by law a cap. That is then not the case. Maybe good to flag that in France they have very recently, on March 14, published a decree whereby they have changed the index applicable to commercial leases. So in order to actually, let’s say, dampen the effect of indexation a bit because there was one component which was quite high, so there has been a change. But still, if you look at that index, you will probably see between 2% to 3%, which I think is still a healthy level. So that’s basically a summary of where we are on indexation, Steven.
Steven Boumans
Okay. Very clear. I have a second question, if I may, that’s on the investment program. Of course, it has been halted due to COVID, but what can we expect for ’22?
Evert Jan van Garderen
Well for ’22, we have, of course, in our portfolio a number of extension possibilities. We just received in France the permit for extending Val Thoiry close to Geneva. That was quite a long process to get to this position, and that is clearly a project we are looking into further. We have started some preliminary works, but it is in a number of phases. So don’t see us immediately in the next months investing a lot of money in a certain property, because these are projects, which will come on stream later on. There is one project, which we are really working on now – right now, which is the third phase in Sweden of our shopping center in Gävle, a bit to the northeast of Stockholm called Valbo, where there is a third phase and that’s about maximum of EUR10 million which we will spend to complete it, but – and it’s pre-let. So that’s project will do. But for the rest, Steven, for this year, we still will continue working on getting further extension possibilities also in the Italian portfolio.
Obviously, we are working further on the extension in Woluwe in Belgium, where we are in quite further advanced stages to obtain a permit. We have made some amendments to our request, which we submitted last year. As a result of the process there, we have recently another meeting with the region and the municipality to make clear what we then will accommodate having heard some suggestions, remarks, objections from those two authorities. No, so we are clearly looking forward to further upgrades to the portfolio and take advantage of extensive possibilities we have. But we’re just coming out of, of course, the disposal program of the EUR200 million which we had announced and now completed and delivered. So we’re of course happy that we can announce that. And now it’s a matter of looking forward.
On the other hand, I must repeat, we are currently in a situation which – what is happening in Ukraine, Russia, which of course creates some uncertainty again. I mentioned various aspects like what is the consumer going to do, what can we further expect from, maybe, indeed inflation et cetera. So I think a cautious view on the next month is probably the best we can do, and don’t jump into big adventures for now.
Steven Boumans
Okay, that’s fully clear. Thank you very much.
Operator
We currently have no questions on the line. [Operator Instructions] We have no further questions in the line. We will move now to the webcast questions.
Evert Jan van Garderen
Okay. I see there is a question from Jaap Kuin of Kempen. I will read his question. Hi all, is there an opportunity to buy a stake in IL Centro? Would you be interested in that? And additionally, could you describe your increased caution on the extension in Belgium?
Thanks, Jaap. Okay, well, thank you Jaap for your questions. The first one is about Italy, IL Centro. It was, as shown on the map. And I think maybe Roberto, you visit IL Centro a bit more than I do. I’ve seen it recently. But it’s nice, but also of course when we go to Carosello or Fiordaliso that’s also very nice centers, but maybe a comment there.
Roberto Fraticelli
Yeah. Now, sure. Jaap, you always have interesting questions. I mean IL Centro is a very nice asset. And as you know, we have a very good relationship with Finiper, one of the shopping centers that we are partnering Fiordaliso. So, of course, every once in a while we have a nice chat but I wouldn’t go further than that.
Evert Jan van Garderen
Yeah. And then maybe, Jaap, on your other question about Belgium, it’s not that we are increased cautious on the extension in Belgium. I think actually we have made quite some steps. And maybe Peter you would like to comment on that a little bit more in detail where we are today, et cetera?
Peter Mills
Thank you, Evert Jan. Morning, Jaap. I think the – we did a public consultation phase at the end of last year, which highlighted one or two sensitive areas from both the region, who are ultimately are the giver of the approval and the municipality. And it’s fair to say that I think the areas that they were particularly concerned about was the height of the building and so we have in response to that, removed one floor of the residential, which won’t affect the economics but will improve that sensitivity.
Mobility is very important both inside and outside the center. So that’s traffic, pedestrians, bicycles, and also inside. and so as a response to that, we’ve had to reduce the line by a meter or two on the building line. We have had to be very careful about our approach to potential flooding and the second basement level and our approach to that. So we’ve been working since the end of last year and had public consultation with both the region and the municipality. We had our last meeting on March 11 in a big group where we met and demonstrated how we were going to solve those issues.
So we are now in a position to resubmit, which we are going to do by June. What all that means is that, in effect, we have had a delay of around six months, I would say, on the project, but it doesn’t affect the economics, although we haven’t tested the building costs with contractors. And if we get to that position, so that we get a consent in the first quarter of next year, then we anticipate an accelerated pre-letting program, and assuming that goes well and we have our planning, which we expect we will get from the region, that’s also something we would look to possibly a joint venture partner at some stage because it – by the time we’ve done the project that will take the end value to somewhere near EUR700 million.
Evert Jan van Garderen
Okay. Well, thank you, Peter. I think that was a very comprehensive answer for Jaap’s question. Let’s see whether there are more questions coming in. Yeah?
Peter Mills
Yeah. No, I don’t see any more questions.
Operator
We have a question from the line if you would like to take it.
Evert Jan van Garderen
Yes, please.
Operator
Next question comes from the line of Steven Boumans of ABN ODDO. Please go ahead.
Steven Boumans
Hi. Maybe one additional question, if I may. We are, of course, already, almost end of March. Could you please comment how you – you mentioned all the uncertainties. Can you comment on consumer behavior in the past couple of weeks when inflation accelerated and yet a Ukraine uncertainty in the different countries for the consumer behavior?
Evert Jan van Garderen
Yeah. Let’s say that that’s obviously difficult to get a handle on, because it is now half or one month, the situation where this war is ongoing and we have February turnover numbers in which we reported about, which were very encouraging. Talking to our country teams, I don’t sense that there is an immediate change in consumer behavior. We still follow our footfall numbers. Of course, for March, it’s too early to tell what the turnovers are going to be, but it’s probably just for now more the sentiment maybe and what you read in the press, we all read the press and look at the television, but we haven’t seen any effects on the ground.
And it’s probably something which also may have to do with certain supplies. It’s not only the spending as such on the consumer side, but maybe some product may not be available. So – but for now it’s more a matter of being cautious because of what is happening in the world than – that we, on the ground, can immediately measure changes, but we cannot exclude them, of course. So that’s all I can say. I don’t know, Peter, anything you would like to add? I mean we have of course our weeklies with the country teams but…
Peter Mills
No. I mean we went through the February numbers yesterday, we were 2.7% up overall. I mean, one has to say there was an outstanding performance again from Sweden, plus 13% compared to February – the pre-pandemic February. There was a plus in Italy, our largest market. And small but very manageable negatives in Belgium and France, and the teams are saying that really from what they’re seeing that inflation is not in those figures because there hasn’t been passed on as yet. And there is very little evidence of discounting in the shops.
So, so far so good. But with caution. I mean, I think the one thing they did all flag was the improved performance of the restaurants in the F&B trade, which perhaps is one of the sectors in our numbers was still lagging a little bit last year due to the restrictions that lingered a little bit longer, but there has been a strong recovery in all our markets in the F&B. So, I mean, we’re encouraged with those but still cautious.
Evert Jan van Garderen
Does that answer your question, Steven?
Steven Boumans
Yes, absolutely. Thank you very much.
Evert Jan van Garderen
Okay. Okay. I can see that there is an – I saw at least there’s another question via the chat-box. And I think that is one from Inna Maslova. I can maybe read it out now. Good morning. Thank you very much for the presentation. A question on Woluwe. When would you estimate to be able to secure a permit?
Well, I think what just – referring to what Peter said about the process, our expectation is that we will be able to submit the, let’s say, amended permit request, honoring the remarks made by the authorities in the summer, and then we will have a similar process like in 2021 in autumn, all with the aim to hopefully then be able to receive the permit possibly in the first quarter of 2023. So that’s currently the planning and that would mean that, yeah, we can of course also start looking into more detail about the construction, the letting et cetera. So it’s not something which is very far out and we’re quite encouraged by the way the authorities now have responded to our amended permit request.
Let me see if there are other questions. That is a question from [indiscernible]. Apologies if this has already been covered. But what is the outlook for the like-for-like rental growth in 2022?
Well, the outlook for rental growth like-for-like, I think most of that is going to be reflected already in – what we have shared for the indexation, our table included in the press release where we for now have included the amount of almost of around EUR7 million of extra rental income because of that indexation. On top of that, of course, there are always individual new lease agreements signed or renewed. It’s probably a fair comment that there could be cases where some of the rental growth you could have achieved on, let’s say, more organic growth path are may be replaced by indexation, but we have to see how that works out in the various negotiations. But I would say the outlook because of this indexation is actually better than we had in the previous years.
Any further addition to make, Peter or Roberto?
Peter Mills
I’ll just add that, I mean, the uplift in the letting program at 5.1% overall last year. I mean, so far – I mean, the main – two of the main contributors to that Italy and Sweden have shown good uplift from what they’ve done so far in 2022. So, in Italy, we have – since January, we’ve signed 29 new leases. That was a period up to the March 15. Along these leases, we’ve achieved a 7.4% increase in rent. In Sweden, we have signed 22 new leases already this quarter with a 7% uplift. So the letting renewal program still looks very encouraging. I would echo what Evert Jan said, that with high indexation coming through in the figures as well, it may be the leasing teams will have slightly harder challenges ahead when it comes to the renewals. But so far, it looks encouraging.
Evert Jan van Garderen
Okay. Well, thank you. Let me see, is there another question coming in. Is there a further question?
Operator
No.
Evert Jan van Garderen
No? No, I think there are no further questions. So I think that concludes this conference call for our annual results 2021. And I would like to thank all participants for listening, also for the questions we got, and I hope it was all helpful and clear. And again, thank you for participating and I wish you a good day.
Operator
Thank you for joining today’s call. You may now disconnect.
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