Hello and welcome to the Klépierre 2021 Full Year Earnings Presentation. My name is Josh and I will be your coordinator for today’s event. Please note that 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 call. [Operator Instructions] I will now hand you over to your host, Jean-March Jestin, CEO and Jean-Michel Gault, CFO to begin today’s conference. Thank you.

Good morning, everyone. And thank you for joining us this morning. We had a very busy and productive Q4, which ended a very successful year. 2021 has been challenging with most European governments implementing multiple trading restrictions to contain the outbreak of COVID-19. Our retail stores have been closed for 2.5 months on average. I am proud of our resilience and the rebound we already noticed, notably supported by our unique operational and financial fundamentals. Before going through the main highlights of the year I would like to pay a special tribute to Klépierre’s team, all my colleagues for their tremendous commitment at every stage of these crises, to serve our stakeholders the best we could and to keep our platform for sustainable resumption. In 2021, Klépierre operation proved to be extremely resilient, as we managed to generate EUR2.18 per share in net current cash flow outperforming our last guidance by 9%. Collect at least 87% of 2021 rents despite 2.5 months of closure and collect more than 93.5% from July to December. Posted 6.9% like for like increase in net rental income. Reduced our net debt by more than a billion leading to a 38.7% loan to value ratio, down 270 basis points compared to 2020 year end and an 8.8 time net debt-to-EBITDA and bring reaching operations back to pre-COVID levels with a signature of roughly 1600 leases, generating a positive reduction, while occupancy increased by 50 basis points over the last six months. Beyond these remarkable financial and operational results, our teams have also delivered exceptional non-financial results, thanks to our Act for Good CSR strategy. We further reduced the energy consumption in our malls by 45% since 2013 and cut our carbon emission by an impressive 84% since the same date. 100% of our malls contributed to local employment through tailor-made initiative. And last but not least, we actively took back to the fight against COVID-19, contributing to vaccinate more than a million people in our malls. These actions made us gain worldwide recognition. GRESB ranked Klépierre first in the Global Retail Listed, Europe Retail Listed and “Europe Listed” categories for the second year in a row. CDP once again included us in the A List of the most advanced companies fighting climate change at global level. Klépierre was also selected by Euronext in the CAC 40 ESG index launched in March 2021. And lastly MSCI upgraded its non-financial rating from AA to AAA, the highest score achievable, demonstrating the group’s ambition to make shopping centers more efficient, and even more environmentally responsible. These scores are a testament to our Act for Good strategy, which addresses social and environmental challenges. This being said, the second half of 2021 proved again that when our malls reopen, our retailers experience happy business resumption. Over the last seven months of the year when stores were reopened, retailer sales reached 95% of the ‘19 levels. Footfall also benefited from the business restart, albeit at a slower space coming out at 80% of ‘19 levels on average, still injured by remaining restrictions in some countries. Overall our malls posted obvious performances, especially in Scandinavia with retailer sales reaching 98% of ‘19 levels over the last seven months of the year. France sales were at 95% and Italian and Central European at 94% and 93% respectively. Even in the Bay Area where our malls are more relying on tourism sales reach 87% of the ‘19 level. By segment, household equipment did best and exceeded pre-COVID levels at 3% compared to June to December ‘19, followed by culture and gift and leisure, which both posted a sustained recovery. Fashion and health & beauty also recorded a strong recovery at 95% of ‘19 levels. And despite continuing trading restriction, food and beverage and restaurants [Technical Difficulty] 84% of ‘19 levels. Our leasing activity has been intense as the demand from pan-European and national brands for assets has been remarkably strong. We assigned 1570 leases in 2021, 65% over 2020 volume and matching ‘19 levels. Reversion is 0.9% over passing rent. At the same time, occupancy improved by 50 basis points compared to June 2021 reaching 94.7%. Over the period, we widened the offering in our malls, especially with key accounts in different segments but also with innovative players. Among others, deals were signed with Inditex, Calzedonia, Sephora, Rituals and Tommy Hilfiger. In the meantime, sport retailers continue to expand with the opening of stores with FootKorner, Adidas, Snipes, or Sidestep. Klépierre also seized opportunity in best-in-class innovative retailers like Samsung, Action, and the digital native optician Mister Spex. [indiscernible]. We have explored a new approach through an innovative partnership model with retailers in which we share investment through joint ventures. We have signed partnership with NOUS anti-gaspi, Lobsta, Von Dutch, Pataugas and Gémo Kids. Our strategy aims at enabling us to welcome new players to boost the appeal and competitive edge of our shopping centers. Let me now walk you through rent collection. We have closed our accounts with a target to collect at least 86.7% of our rents and charges. As of February 7, we had already collected 85.7%, hence only EUR13 million are yet to be collected to reach our target and this will be achieved before the end of this month. Based on our target, the 17.3% of non-collected rents in 2021 breaks down as follow; 7.5% of rent abatements, 3% of provisions for bankrupt and insolvent tenants, and 2.8% of provision for credit losses booked pending the final outcome of negotiations. If we benchmark 2021 against 2020, we see that in terms of rent collection, despite the longer closure period, the rent abatement in 2021 represent 0.9 months or 2.5 months of closure against 1.2 months of abatement in 2020 for 2.1 months of closure. In 2020, the ultimate bad debt provision for insolvent tenants ended to a low 3.3%. Let me now talk about balance sheet. 2021 has been an important year in terms of disposals as we managed to close transactions for a total amount of EUR874 million. Deals were made at an average yield of 5.4% in line with appraisals value in Germany, Scandinavia, France and Central Europe. 2021 has also been characterized by stabilization in the value of the shopping center portfolio, which is up by 0.6% on a like-for-like basis over the last six months. This is the result of changes in appraisal assumption which factor in 1.3% positive cash flow partially offset by a 0.7% negative market effect. These valuations point to an average EPRA net initial yield of 5.2% for the shipping center portfolio, down 10 basis points compared to 2020 year end. Regarding investment now, in 2021 Klépierre continued to carefully monitor its capital expenditure and to focus on its main committee projects. Overall EUR101 million were allocated to the pipeline, mainly relating to Gran Reno in Bologna and Grand Place in Grenoble. The 17,000 square meter extension of Gran Reno is due for completion in May 2022. As of today, pre-leasing is progressing very well with 77% of the extension already lend and 22% in advance negotiation. Exciting new brands such as Nike, Primark, Tommy Hilfiger, H&M and the Inditex banners will be added to the mix, bringing this leading mall to the next level. Everything is on track to reach our targeted return on investment of 6.1%. In Grenoble, Grand Place, refurbishment is soon to be delivered, while is the extension is scheduled on September 2023 to open. Pre-leasing is already high reaching 82% with 56% of leases signed and 27% in agreed form. This complete remodeling will house the first Primark store in the region, 15 new boutiques and 10 restaurants with indoor and outdoor terraces, offering customers a great dining experience. We are confident in our ability to reach 7.9% of hidden cost for this project. Let’s have a look on leverage now. Thanks to our strong cash flow generation of EUR720 million and close to 850 million of disposals, we sizably reduced our net debt by more than a billion, down to EUR8 billion. Besides, as you can see, these proceeds covered our distribution to shareholders and our capital expenditure. I think that these elements clearly showcase how solid our financial situation is, as is our ability to preserve long-term performance, while serving the interests of our stakeholders. Here are a few numbers to illustrate the solidity of our balance sheet. The loan to value ratio reached 38.7% below 2020 levels and was even down 390 basis points compared to June 2021. Similarly, net debt to EBITDA decreased to 8.8 [phonetic] times. As of December 31, 2021, EPRA NTA per share was stable compared to December last year, and amounted to EUR31.2 and those strong results led S&P to confirm Klépierre’s current rating BBB+ outlook stable. Relying on these positive financial and operational figures, the supervisory board will recommend that the shareholders, at the next Annual General Meeting on April 26, approve a distribution of EUR1.7 per share. This represent a payout of 78, and 70% increase compared to 2020. Lastly, in 2022, the group expects to generate a net current cash flow per share of 2.3 -- between EUR 2.3 and EUR2.35. This guidance assume that business recovery will not be impacted in 2022 by further COVID-related disruption of our clients’ operations. It represent a 9.5% to 11.9% growth compared to the EUR2.1 net current cash flow per share generated in 2021 after having restated the disposal impact. I will end my remarks on this note and open the floor to question. Thank you for your attention.

[Operator Instructions] Our first question comes from the line of Robert Virdee from Green Street, please go ahead. Okay, so it sounds like Rob Virdee is no longer available. [Operator Instructions] Okay. Our first question comes from the line of Florent Laroche-Joubert from ODDO BHF, please go ahead.

Yeah, so, hello, thank you very much for this presentation. I would ask maybe three questions, if I may. So, first question, so would it be possible to give us maybe more color on the original financial strategy now because so before COVID crises, your financial strategy was characterized by a balance between disposals, reduction of debt, and share buybacks, so what is your intention for the next years? My second question, so would it be possible maybe to have a first estimate of the correction weight in Q1 2022? And my third question is more on 2023. So we can see that 2022 will be still a normalization year and I can see that for 2023 consensus expect maybe a net current cash flow per share of EUR2.50. So what do you think about this estimate? Do you think it’s something that is visible foreclosure? So thank you very much.

So thank you, Florent, for your three questions. I think for the financial strategy, I think we will keep following the portfolio strategy, which is to constantly focus our portfolio to the large asset in the larger City of Europe. So we are disposing every year of non-core assets and this has historically been rebalanced by either our pipeline invest investment or acquisition or share buyback. So we will probably continue to have the same financial discipline of keeping the leverage at the lowest level for us. And I’m sure that the disposal we have done gives us plenty of room of maneuver for the years to come. For Q1 2022 rent collection is starting faster than last year. So, as of today, we are around 75%. So a bit lagging compared to what we were used in 2019 but far quicker than in 2020 and 2021. So 75%, that’s a good start and we expect to reach high levels around 93% pretty soon.

It’s even higher on January where we are at 83 already. February is a little bit low.

Yeah, I was talking about the whole quarter. So, January is already – yeah, yeah. For the consensus of 2023, we are here today to provide the guidance for 2022. I think as you have indicated, 2022 is a year of business resumption and is probably at the road to what was the cash flow before COVID, so we are confident in the trajectory and I’m sure that 2023 will be also a good year after 2022.

Okay, so thank you very much.

Thank you very much. Our next question comes from the line of [indiscernible] from BNP Paribas, please go ahead.

Thank you very much for the presentation. Just a quick one on one of the key topics, indexation, and how you can pass inflation into your tenants. It seems that for some countries, some retailers, it is going to be difficult to pass in full the inflation, the increasing CPI. I’m referring to Spain and France and also your key tenants. So what sort of conversations are you currently having with those groups of stakeholders of retailers in terms of inflation?

So all our leases are -- thank you for the question, so all our leases are indexed to CPI or related CPI indexes, so contractually index is due and they have been charged to tenants at the beginning of 2022. It’s fair also to mention that in some countries indexation is at a very high level, so Spain is around 5.6%. So probably we’ll have a conversation with our retailers. I’m sure we will find the good compromise, but contractually indexes are due and has been charged to tenants. So globally for 2022, we have in average -- in our forecast, we have an average between 1.9% and 2% indexation in our numbers for the whole Europe.

Okay, thank you.

Thank you very much. Our next question comes from the line of duty in Julian Livingston-Booth from RBC. Please go ahead

Good morning. My question was exactly at the same, really about the indexation, maybe just a follow up. If you’re only going to get around 2% from indexation, are you likely to get other benefits from your tenants instead? And linked to that, I think the occupancy cost ratio is still only 12 to 13 times across your portfolio, so you don’t feel the tenants could pay that higher indexation.

Thank you for the question. So, I think the – let’s make it simple, the indexation is contractually due and the indexation will be in most of the circumstances paid by the tenants according to the contract and I will put an end to that discussion about indexation. So, indexes -- and I just -- we just indicated that in our numbers, we have taken the view that indexation for the whole year will be around 2%. It may be higher, we will see, but we have taken that assumption. So, once more indexation is due, we will have probably some conversation in Spain with some of the retailers but I’m confident this will be a beneficial to us.

Okay, thank you.

Thanks very much. Our next question comes from the line of Marcus Tressa [ph] from Bank of America. Please go ahead.

Yeah, hello, can you hear me?

Yeah.

Coming back, just under question on indexation [indiscernible] what was the indexation impact in 2021 and maybe we like-for-like ‘21, if we exclude any COVID effects, so just indexation plus your re-lettings and change in vacancy?

Thank you for the question, but I’m not going to answer to that question. I think the like-for-like NRI growth is the NRI 2021 versus NRI 2020. So 2020 was impacted by COVID, 2021 was impacted by COVID, so the like for like between two impacted years of COVID is 6.9%. And I can’t give more information about this.

Okay.

So in short, 2021 was –

Was less than 1%, yeah, 0.5, yeah.

Okay, less than 1%. Okay. And my second question is on your guidance for net current cash flow per share, maybe you can walk me through. If I look at your 2021 numbers, the implied NCCF for H1 is around 1.5 per share, so if I’m just taking a simple calculation and multiply by two, I take out your disposal impact you guide, I come around to 2.8 NCCF versus your guidance of 2.3 to 2.35. Can you maybe guide me how you came to your 2.3?

I think it’s rather simple, I don’t recommend you take H2 and multiply it by two. So, the second half has been better than the first half because we have better collected rents on H2 than on H1. So, I think the guidance for 2022 is based on the net current cash flow of 2022 where we have excluded some COVID impact plus organic growth and then it reached 2.30 to 2.35. So I recommend that you don’t take second half and multiply it by two.

Okay. So on why it is more 2.3 and this has no COVID effect anymore, no more provisions or bad debt?

No, we have taken the view that we will have no severe restriction or disruption due to post COVID or COVID-related events. In our guidance, we have taken certain assumptions for rent collections and for rent abatement and they are included into the guidance.

Yes, we are not exactly back to the same level we had before COVID in terms of rent collection. I can see 2022 is not exactly the back to normal, yeah.

Okay. What is the back to normal year, it is maybe the moving rents we have in between, so if you didn’t -- if you had 100% rent collection, would it be coming back to pre-COVID levels of 2.8?

Well, sorry, if we take it by the other side and we look at 2019, which was a last undisturbed period where you remember cash flow was at 282. In between we have disposed for about 0.22 In terms of cash flows of disposal, cash flow prevention, so we are 2.60. This is a fair comparison we should do with what we are saying today, 2.30 to 2.35, and this is clearly the next target for us to go back at least to 2.60.

Okay. And 2.60, excluding all of your disposals impact?

It is 0.08.

Okay. Very clear. Thank you.

Thank you very much. Our next question comes from the line of [indiscernible]. Please go ahead.

Hi, good morning, I guess the main question on the footfall and retail sales and then I think one final question on the rent reversion. So on footfall and sales, because you however still had, especially if you compared to maybe other companies that have reported in the 80s for footfall and then in the 90s for retail sales, you can maybe shed some light on the December and January numbers for those and your expectations for, let’s say, the first half of ‘21?

Yeah, I think when we benchmark Klépierre with the rest of the industry, we can notice that bit everywhere in Europe footfall is around 80% of ‘19 levels, while in sense our closer to 95%, 96% of ‘19 level. So, there is a lot of negative about it, I think the number of visitor is less, we are still in an environment which is not fully secured. But the conversion per visit is higher so I think it’s -- they are solid numbers. We will see our footfall developing in 2022 and 2023 post-COVID and we’d report on that. For sales, December has been quite good everywhere, so around 93% compared to ‘19 levels, if on top of my mind. January has been less good, okay. Sales has been quite deceptive, so I think we have January sales around 85% of ‘19 levels. We expect February to be better. The feedback we have formulated is February is better than January.

Right. Thank you. That helps. And if you look at the reversion number you posted because I think at Q3, you still had a negative number for reversion. So it looks like you signed quite a bit of positive delta contract in Q4. Maybe if there’s any outliers worth mentioning that would be great and what’s your expectation for reversion this year?

Well, I think the first important takeaway is that in that difficult environment, we have been able to sign a good number of leases. And it’s fair to say that at 0% or slight -- 1% reduction, which I think it’s a fantastic achievement. So by quarter, it’s difficult to say, and to the whole conclusions, if the quarter has been less positive than the other. So on the whole year, it’s 1% up and I think it’s a remarkable achievement. For next year, we expect to two important things. First one is that tenant sales will be comparable to what we have experienced since reopening of the malls and we also are very confident that the demand for our malls is strong and that we will be able to sign your leases, probably, the same volume than we signed this year. And when it comes to reversion, we have taken some view in our forecast and we’ll keep it for us but we think we can still expect to have a positive reversion next year.

Okay, great. Thanks.

Thanks very much. Our next question comes from the webcast. Please go ahead.

Do you think you will pay a dividend in 2023 comparable to the one paid in 2019 and if not, when do you think it will be the case?

Well, I think we are paying a dividend for 2021. This is -- we are back to pay out very close to what we were used in the past so -- and I think our KPI or strategy has always been to pay a cash dividend to shareholders, and we have been among the very few able to pay a dividend and a growing dividend in two last years. So for 2023, we will see when it comes.

As you have seen, we are with about 80% payout ratio. So, you know the guidance, you can probably build an assumption from there.

Excellent. So, our next question comes to the line of Stephen Alfonso [phonetic] from Invest Securities, please go ahead.

Good morning. Thank you for this presentation. I have one question on my side regarding the dividend. So, some of you peers gave a mid-term guidance on their dividend, especially [indiscernible] with a dividend at least stable for the next five years and I think that part of the increase in the stock price is linked to that. So my question is, why didn’t you adopt the same communication strategy?

That’s a good question. I think we -- I think in the past history in our industry, those who have provided mid-term guidance has never been able to deliver that, okay. So we give a guidance for next year. We pay a dividend to our shareholders in cash and I think it’s -- and we have a loan to value which is decreasing, we control the balance sheet, so this is probably the best evidence that we have the capacity to pay regular dividend in cash to our shareholders. And we will see 2023 when it comes but the track record of Klépierre speaks for itself.

Thank you.

Thank you. Our next question comes from the line of Pierre Clouard from Kepler, please go ahead.

Yes, thank you. Good morning. Just coming back on your capital allocation, you always had the strategy of keeping a level of debt stable around 9 billion, so you are now at eight. So can we expect an increase of the debt through with the acquisition of share buybacks? On the other side, are you done with disposals are or can we bet on, I don’t know, half billion of new disposals in 2022?

I think once more the strategy is very clear. We continue step by step to dispose the non-core assets when we’ve seen that we cannot grow the cash flow any longer. So we do that, as you can see, almost every year. I have to confess that the 2021 has been an exceptional year in a very difficult investment market environment. And when we started the year, we didn’t expect it to be that successful, so, for 2022, we’ll continue putting the portfolio. When it comes to the level of disposal we can achieve I will be, like always, we will tell when it comes, we never gave any guidance about disposal, so we stick to what we are used to say to the financial market. That’s another question? No, I don’t think.

No, that’s clear. Thank you.

Okay. So over to the webcast for another written question.

Yes, the question is probably for me. Can you please elaborate on financing conditions? Well, as you know, in Europe, like in the US, long-term interest rates have increased quite sharply for different reason, inflation, but also probably Ukrainian story also that had put pressure on financial market. The movies [phonetic] about 50 BPs 40 BPs, 50 BPs on long-term duration, seven, ten year swap when the [indiscernible] is still quite stable that is to say at the minus 0.5%. When it comes to Klépierre, we are agile and like to keep that close to 90%. Right now 89%, actually, so we are pretty well covered. So we don’t expect any material change due to this. In terms of refinancing, we don’t have significant refinancing this year, it’s less than EUR400 million coming to redemption and it’s about EUR900 million next year, but we have 2.8 billion of liquidity positions. So we are not in the rush to go to the market now. Well, we will see and, of course, we monitor the situation, but we don’t see the cost of the debt being significantly impacted; I mean, a couple of BPs maybe but probably not very much than this in the next coming probably two years, to the level of hedging we are.

Thank you. [Operator Instructions] Our next question comes from the line of Rob Virdee from Green Street. Please go ahead.

Good morning, gentlemen. Please talk a little bit more about the capital allocation, where you currently stand. Really, what I want to know is how do you propose to close the gap between yourself and NTA? Do you --

We don’t hear you very well. I think you need to fix that otherwise we don’t answer – we can’t answer question.

The gap between NTA and share price, how we can manage this gap?

No, I think this is a question that you probably have to do your -- you need to do your homework for that. I think the context in which we are releasing our earnings, it’s -- I think we have a very solid earnings, the business is back, sales are high compared to ‘19 levels after almost six months of closing in Europe, footfall is strong, rent collection is very high, demand for our malls is fantastic. We are signing leases with a 1% reduction in the most difficult period of our time. We have been able to dispose assets at book value at a 5.4% net initial yield. We have a strong balance sheet. So the gap between NTA and the share price should be resolved at some point of time. So Klépierre is proving I think the extreme resilience of our cash flows going through the period. Our growth for the 2022 is 10% above this year, back to probably in 2023 to normal numbers. So I think the market is not recognizing fully the resilience of our business model and I hope, at some point of time, it will do it.

[Operator Instructions] Okay, looks like we have a question from the webcast, please go ahead.

Here’s the question is about the tax treatment of the dividend paid in 2022. So first to say we are not used to give tax advisers, so we would recommend you to have a look at it from your side, but the fact is that when it comes from equity repayment, they are not subject to withholding tax. This is what we will what we can say. So the normal tax treatment of these, it correspond to a lowering of the share price -- of the price of the shares you add in your books, and the taxation will come when you will dispose the shares through the capital gains tax.

So, thank you very much for attending. Thank you very much for your question, a lot about indexation. I will end on the good news. Once more, this has been what I would say an exceptional year in a very difficult period of time. We are exceeding our guidance. We are growing the cash flows. We are strengthening the balance sheet. So, I think Klépierre has delivered exceptional earnings today and we are looking forward to see you soon and the agenda for Klépierre, the next one is a General Meeting on April 26 at 8 AM in the morning or 9 AM in the morning. So thank you very much for taking the call and see you soon.

Okay.