Icade (OTCPK:CDMGF) Q2 2024 Earnings Conference Call July 22, 2024 5:00 AM ET
Company Participants
Nicolas Joly - Chief Executive Officer
Christelle De Robillard - Chief Financial Officer
Conference Call Participants
Stéphane Afonso - Invest Securities
Valerie Jacob - Bernstein
Celine Soo-Huynh - Barclays
Florent Laroche-Joubert - ODDO BHF
Marc Mozzi - Bank of America
Adam Shapton - Green Street
Jonathan Kownator - Goldman Sachs
Operator
Good day and welcome to Icade 2024 Half Year Results Presentation hosted by Nicolas Joly, CEO; and Christelle De Robillard, CFO. Throughout today's presentation, all participants will be in a listen-only mode. Later we will conduct a question-and-answer session. [Operator Instructions]
And now I'd like to hand the call over to Mr. Nicolas Joly, CEO. Please go ahead sir.
Nicolas Joly
Thank you. Hi, everyone. Good morning. Nicolas Joly speaking. Thank you all for being today around the call. I am with our CFO, Christelle De Robillard. So, this one morning, we are pleased to present Icade's results for the first half 2024. This presentation will be, of course, followed by a Q&A session.
So, let's move to Slide 4 for an overview of the main messages for the first half of the year. The Investment division showed resilience with revenue growth supported by indexation and by the well-positioned office and light industrial segment. In addition the fall in asset valuation was contained this half year.
On the property development side, the operational performance reflected an environment that remained challenging. The volume of orders stabilized in H1 2024 compared to the same period last year, but the pressure on prices remained high, in particular, on bulk sales. This has led us to be even more cautious in launching new projects and to carry out an exhaustive review of our operations portfolio.
The group's balance sheet remains solid, particularly in terms of liquidity even though it reflected a lack of disposal in the first half of the year. Against this backdrop, Icade confirms its guidance announced in the 19th of February 2024. We will come back to this later.
Finally, we will take advantage of this presentation to give an update on the progress made in the implementation of the ReShapE strategic plan by sharing with you the first concrete steps that has been taken.
On Page 5, you will find the key figures for the first half of the year. At group level, Icade posted a solid net current cash flow equal to €169 million. Cash flow from strategic activities, i.e. property investment and property development, was stable at €111 million.
NAV NTA decreased by around 7% to €62.6 per share against the backdrop of a contained fall in valuation in H1 2024. In terms of liabilities, the LTV ratio reached 35.9% at the end of June compared with 33.5% at the end of 2023 given the absence of disposal during the first semester.
Net debt to EBITDA stood at 11.4 times at the end of June 2024. This ratio was impacted by the one-off impairment charges booked on the Property Development business following the portfolio review.
In the Property Investment business, gross rental income came to €188 million, up 4.1% on a like-for-like basis, driven in particular by the effect of indexation. The gross asset value of the portfolio came to €6.6 billion, which is a limited 3.8% decline on a like-for-like basis. The EPRA net initial yield was 5.2%.
In the Property Development business, economic revenues were stable at €583 million, supported by the consumption of the backlog built at the end of last year, while the margin was negatively impacted by impairments, which we will detail later.
So, let's move on to Page 6. During the first half year, we have again demonstrated our ability to pioneer climate issues and commit to reflection and concrete action particularly in relation to energy consumption management.
At the 2024 General Meeting, Icade set itself apart by being the first listed company in Europe to submit two separate resolutions on Climate and Biodiversity to the vote of its shareholders. These two resolutions were approved by a very wide margin over 98%.
Our commitment has been highlighted and rewarded during last month. For the third consecutive year, the financial term indeed recognized Icade's commitment to combating climate change, ranking the group in first place among French real estate companies. Icade also obtained the Cube Flex award, an initiative sponsored by the French Energy Regulatory Commission attesting the quality and adaptability of its energy management policy.
Let's look now at performance by business division, starting with Commercial Investment. The Commercial Investment division continued to operate in H1 2024 in a sluggish leasing and investment environment. The rental market in the Paris region slightly decreasing compared with last year with a 5% fall year-on-year but an expected volume of around 1.8, 1.9 million square meter for 2024 in line with last year.
Transaction above 5,000 square meter were slightly up compared with H1 2023. The polarization of the market has continued although demand has been shifting away from Paris CBD. Indeed take-up in Paris excluding CBD was up 81% year-on-year and La Défense 7.4%. The vacancy and incentives have continued to grow in recent months.
Outside the Paris region, rental activity was down by 21% according to the Q1 2024 latest published data, but prime rents and vacancy up as well. The investment market is still sluggish with an investment volume of less than €6 billion, down almost 30% year-on-year. Transactions focused mainly on prime assets for deals below €100 million.
Given the improvement in the risk premium, we are seeing some early signs of prime year stabilization, primarily in more central districts. So let's turn to Slide 10 to see how Icade has performed in this environment. Against the backdrop I just described, Icade recorded a good level of leasing activity with around 56,000 square meters signed or renewed in the first half of the year.
These signatures and renewals represent an annual rental income of €16 million and a WALB of 6.3 years. The good rental momentum was driven by the two main asset classes, namely well-positioned office and light industrial assets, which accounted for 87% of the €16 million of additional income. In addition, the occupancy rate remains above 90% for these two asset classes.
The dynamic rental activity also illustrated the good level of demand for our business part, with almost 12,000 square meters let in the Paris Orly-Rungis Business Park and 7,000 square meters let in the Portes de Paris Business Park.
On Page 11, we thought it was important to provide you with an update on 2024 lease maturities compared with the situation at the end of December 2023, since we now have good visibility until the end of the year. In H1 2024, we managed to defer €25 million of lease maturities beyond the present year.
As of the 30th of June 2024, we expect to lose more than €30 million in annual revenues out of the €37 million of maturities expiring in H2, most of which will relate, as we've already said, to the Pulse building and to assets to be repositioned.
Let's move on to page 12 related to the current pipeline. It represents additional revenues of €45 million on an annual basis including €21 million by the end of 2025. We have good visibility over these revenues as 82% of which are secured following the continued marketing of the Edenn building to Schneider Electric during the first semester. The pipeline represents relatively limited CapEx of €288 million by 2027.
The diversified project in the pipeline are also consistent with the ReShapE strategic plan and include well-positioned offices in central location as well as data centers and a project to convert offices into a hotel. All these projects will comply, of course, with the highest environmental standards.
And to illustrate the further future diversification of our portfolio. Slide 13 shows the progress we made up to now own data centers project. Firstly, the data center to be led to Equinix located in the Portes de Paris Business Park has progressed according to plan. Work is due to start next October, with delivery scheduled for Q3 2025.
Secondly, we've reached an important milestone in the hyperscale data center project located in the Paris Orly-Rungis Business Park, we have indeed secured access to energy from FTO for the requested 130 megawatt power by 2031. In line with the pillars of ReShapE strategic plan, we have also made progress in analyzing the office portfolio to be repositioned and in carrying out conversion projects for certain assets.
In particular, in H1 2024, the Investment division sold the Icade asset to the Property Development division with a view to converting it into housing schemes. Located in Le Plessis-Robinson, this program is co-developed with SEMPRO, the local urban planning agency and this asset was sold in line with the NAV, as of December 2023, with a view to developing a mixed-use district, comprising shops and 650 homes and aiming for the top environmental tell certifications.
As of June 2024, the portfolio of assets to be repositioned represents a gross asset value of roughly €700 million or 12% of the total portfolio compared with 14% at the end of December 2023. Future projects have already been identified for 63% of this value.
Let's move on to Slide 15. In July 2024, Icade successfully signed agreements to sell two core assets located in Marseille, for a total of approximately €45 million. This transaction will conclude on an average yield of 6% in line with the prime rate observed in the region and demonstrate the Group's ability to sell its well-positioned assets in line with the latest appraisal value.
Let's now move on to the operational performance of the development business line. So the property development market was once again very challenging in H1 2024. In addition to a persistently high interest rate environment and to an unfavorable tax scheme, there were also political uncertainties in France, with legislative election in July and forthcoming changes in government. Furthermore, support for activity from social and intermediate housing institutional investors should be lower this year after a strong contribution in 2023 in supporting activity. As an example, this year we should continue to support the housing market in 2024 but with a 30% to 35% reduction in orders.
Let's turn now to Slide 18 to see how Icade has performed in this environment. The Property Development division recorded 2,110 orders, down by 1% in volume terms and 8% in value terms. Orders for homes sold individually dropped by 6% in volume, nevertheless outperforming the market, which was down 21% year-on-year. Volume on bulk orders continue to grow by 5% but nowhere near the levels since last year.
In terms of value, there was a clear downward pressure on bulk sales, with orders down 5% in value, despite this increase in volume. In this context, the Group has been even more selective with a pre-sold grade on operations launched in H1 over 80% compared with 59% for the same period last year. Sales launches were down 40% year-on-year compared with minus 30% in H1 2023.
In Slide 19, we are happy to present a new project illustrating the complementary nature of our two business line. The Development division indeed completed in July the acquisition of another to be repositioned assets from the investment division. Located in the center of Lyon, the office tower will be converted into roughly 100 high-end housing units by the end of 2026.
47 social housing units have already been sold in bulk in July 2024 to the social landlord Lyon Métropole Habitat. In H1 2024, the development division demonstrated again its expertise in mixed-use project, which is a key component of the 2050 city. In June 2024, we inaugurated a large-scale campus dedicated to soft industries, technologies and services, comprising 7 assets built on a site of almost 7 hectares. The PION campus is a genuine demonstration of our expertise in large-scale mixed-use projects with a positive impact on nature.
In addition, in H1 2024, Icade Promotion began work to build a digital and emerging technology campus in the South of France. These works are part of the property development contract, representing €53 million signed in June 2023. The delivery is expected in September 2026. It's worth noting that this is the first milestone in a wider project that could potentially include also sudden housing.
I'll now turn the floor over to Christelle to present the financial results.
Christelle De Robillard
Thank you, Nicolas. Now, let's move on to the presentation of our H1 2024 financial results. Net year end cash flow from strategic operations remained stable at €111 million compared to June 30, 2023. This is a result of differences in performance between the business plans. The Property Investment division net cash flow increased strongly by €35 million compared with H1 2023, especially thanks to higher rental income and lower finance expenses.
The Property Development business, net fund cash flow decreased by €34.5 million compared with H1 2023 due to one-off impairment losses on projects in the portfolio. I will come back to this later in detail. Overall, the group's net cash flow stood at €169 million, reflecting the impact of the disposal of the Healthcare business on cash flow.
Let's move on to Slide 23. As of June 30, 2024, EPRA NAV per share was €62.6, declining roughly by 7%. This year-on-year change is due in particular to the evolution in the value of the property investment portfolio, representing €3.3 per share and the interim dividend paid in March 2024 of €2.4 per share.
Let's dive into the financial performance of Property Investment Division in Slide 25. There are 3 messages to take away from this slide. Firstly, the Property Investment division revenues came to €188 million in H1 2024, up €7 million on a year-on-year basis.
Secondly, the like-for-like growth was solid at plus 4.1%, supported by the positive impact of indexation plus 5.5%. This positive effect was partly offset by the effect of tenant departures, minus 1.2% and negative reversion on renewals, minus 0.2%. Slightly, growth was driven by the performance of the well-positioned offices and Light Industrial segments, which saw revenues rise respectively by 6.4% and 7.8% on a like-for-like basis.
As previously mentioned, the net rent cash flow of Property Investment division was sharply plus 35% year-on-year. This is a result of higher revenue, lower cost, some in particular to a decrease in energy costs and some positive one-off effects and of the improvement in the financial results, driven by the combined effect of a lower cost of debt and higher finance income and cash invested.
Slide 27 for the duties and changes in the value of the investment portfolio. As Nicolas mentioned, the value adjustment was contained at minus 3.8% on a like-for-like basis. Disposals and investment did not have a significant impact. The EPRA net initial yield was 5.2% marginally lower than in December 2023, reflecting the one-off impact of franchise as the calculation of this indicator is now based on invoice trends rather than high IFRS rents in accordance, with EPRA recommendation. The EPRA topped-up net initial yield is 6.3%, up 0.2% on December 31, 2023.
Slide 28 illustrates the slowdown in value adjustments in our portfolio. In H1 2024, we saw a slight increase of 0.7% in the valuation of light industrial assets and asset class that has shown its resilience over the past 24 months.
For offices, the adjustment over the first half of the year were less pronounced than over the previous three half shares with a 3.6% decline in well-positioned offices and a 7.3% decrease in to be repositioned offices. Overall, both asset classes are currently valued at 26% and 46% less than they were 24 months ago.
Let's jump on the property development results on slide 30. Given the market context previously described by Nicolas, Icade team conducted a comprehensive and in-depth review of the project portfolio. This review led to the recognition of significant impairment losses totaling €85 million before tax i.e., €63 million after tax. The impact on net current cash flow amounted to minus €34 million and is linked to the adjustment of price bid on ongoing projects.
The impact on net current cash flow was minus €29 million and related to the recognition of significant impairment losses and the depreciation of land prices for reconfigured or discontinued projects.
As a result, the net current cash flow from profit development is at minus €21 million at the end of June compared with €14 million in H1 2023. It should be noted that excluding the effect of impairments, the division net current cash flow would be relatively stable, thanks in particular to rigorous operational cost management, which had a positive impact of nearly plus €6 million compared with the same period last year.
Let's move on to debt management. The H1 2024 performance was marked by a very good financial results. Apart from income coming from the deconsolidation in the health care business, composed of interest on the loan to IHE Healthcare Europe, and dividend received from this entity, the increase in the financial results reflects the rigorous management of cost of debt and an optimization of cash management.
On the one hand, the cost of debt remains very low and has even improved in H1 2024 to 1.52% compared with 1.6% at December 31, 2023, thanks to additional hedging. The projected 2024 debt is also fully hedged.
On the other hand, the group recorded substantial income this half year, up by €19 million, compared with the same period in 2023, with an average cash volume of €1.2 billion invested at around 4%.
Let's move on to slide 34. Icade maintained a very strong liquidity position of €2.4 billion, covering its debt maturities until mid 2028. In addition, in the first half 2024, we successfully bought back €350 million of bonds, enabling us to proactively manage the debt maturity schedule and reduce the next 2025 and 2026 bond maturities.
Page 35 presents our key balance sheet ratio as of June 30, 2024. LTV was up 2.4 points at 35.9%, reflecting the change in the value of the property portfolio and the absence of asset disposals in H1 2024.
At 11.4x, the net debt-to-EBITDA ratio as of June 30, 2024, resulted from the impact on EBITDA of the impairment losses booked on the property development business. This impact accounted for 2.7 points of the increase in the ratio.
Let's move on to Slide 36, for an update on the disposal of the Healthcare business. During the first half of the year, discussions on Stages two and three continues, but no new milestones have been reached so far. Nevertheless, we confirm the disposal strategy of healthcare activities remain the same, and the terms and condition of stages two and three are unchanged.
As for Stage 3, the marketing of the Italian asset portfolio has started to generate interest from prospective investors. It should be noted that the value of the healthcare portfolio, remained stable at minus 2%, over the semester, given the resilience of these assets and the solidity of the CNS.
I'll hand over to Nicolas for the conclusion, and details on the guidance.
Nicolas Joly
Many thanks, Christelle. Based on the group's results as of the 30th of June 2024 and expectations for H2, Icade reaffirms its guidance of a total net current cash flow between €3.55 and €3.70 per share, for the full year 2024. This is made up of firstly, the net current cash flow from strategic activities, between € 2.75 and €2.90 per share; and secondly, from net current cash flows from discontinued activities of circa €0.80 per share.
In Property Investment division, we showed good resiliency in the first half of 2024, and benefited from strong income on invested cash. For H2, we anticipate a lower growth in cash flow for this business line compared to H1, given the departures of some tenants and the decrease in investment income.
In the Property Development business, we expect a stabilization following a major adjustment in H1 2024. On the net current cash flow to be expected from discontinued activities, we have now a good visibility as it is secured at the end of June, at 95%.
Well, to wrap up, I would say that Icade, navigated through an environment that remained quite challenging, in the first half of 2024, with a number of indicators showing resilience, our financial and operational performance reflects our ability to adjust to changing market conditions, without losing sight of our long-term goals.
We achieved indeed some meaningful first steps in the deployment of our 2024-2028 ReShapE road map, and I look forward to updating you on our progress. Thank you very much.
And with that, let's start the question-and-answer session.
Question-and-Answer Session
Operator
Thank you, sir. [Operator Instructions] We will now take our first question from Stéphane Afonso from Invest Securities. Please go ahead. Your line is open.
Q – Stéphane Afonso
Yes, good morning, and thank you for the presentation. I have two questions, if I may. The first one regarding offices, would it be possible to share the reduction rate captured in H1 for well-positioned assets. And secondly, in terms of disposals, what proportion of noncore offices we intend to sell to Icade Promotion? And finally, could you give us more color on the progress of discussions about the next steps of Icade company disposals? What could we expect by the end of the year? Thank you.
Nicolas Joly
Okay. Thank you, Stéphane. Well, as for the reversion for the well positioned asset where the signatures and renewals were as always in line with the ERV. So did the incentives, in line with the market practice. Globally, we stick to the global figures shared during the first semester. And at this point, there is no updated figure to disclose regarding the global reversionary potential on well-positioned assets, maybe you can consider, let's say, in the mid-term a slight decrease, because as indexation continues to impact positively and strongly, the rent as you saw in H1, of course, the ERVs are going up, but not at the same pace. But globally, we were in line with what we've already shared.
For your second question about disposal to be sold to Icade Promotion. Well, there's no specific target, but I mean it really depends on the project. Honestly, you know that on the one asset to be repositioned at the end of the day the strategic view on that is to sell those assets, but we need to have a proper reconversion plan. Sometimes Icade Promotion is the best partner to do so, because we are fortunate enough to have the toolbox in-house. That's what we did in the Plessis-Robinson. That's what we did in Lyon-Lafayette. But I mean we can also do that with other partners. So no specific target in mind.
And as for the health care disposal, well, as Christelle said you know that there's absolutely no change in our strategy. And I mean executing Stages 2 and 3 are one of our top priorities. And as already shared in our view, it's not a matter of execution, it is all a matter of timing.
And to be more specific on Stage 2 where we have regular discussions with Præmia REIM, the former Primonial REIM and other third-party investors, some concrete step has been taken during the first semester to renegotiate the liquidity conditions offered to shareholders since the investment series is not necessarily the same from new investors than the existing minority shareholders. This in addition to the quite stabilization of the value in our view should facilitate the entry of new investors.
As for Stage 3, as Christelle said while the marketing of the Italian portfolio is ongoing, it's an attractive portfolio. The Præmia REIM team and the shareholders have selected a bank to structure the process, and we've already received some unsolicited first expression of interest on some assets of the portfolio. So that's where we stand today.
Well, bear in mind that globally this is definitely a resilient asset class that delivers strong predictable cash flow, steady cash flow, delivering steady dividend, as you saw, because it enables us to have secured more than minus 5% of the cash flow coming from the discontinued activities during the first semester.
Stéphane Afonso
Thank you, Nicolas. I have just one last question if I may.
Nicolas Joly
Sure.
Stéphane Afonso
Would it be possible to share the like-for-like growth of Icade Sante’s values in H1 please?
Nicolas Joly
Sorry, the like-for-like growth.
Stéphane Afonso
Growth for Icade Sante appraisal values in H1?
Christelle De Robillard
We don't disclose the like-for-like growth in Icade Sante, but what we disclosed in an estimation of a decrease of an average 2% both on IAG and the Præmia REIM.
Stéphane Afonso
Okay. Thank you very much. That's all.
Nicolas Joly
Okay. You’re welcome.
Operator
We will now take our next question from Valerie Jacob from Bernstein. Please go ahead.
Valerie Jacob
Hi, good morning. So I've got three questions. My first question is about the property development business. You said you expect a stabilization in H2. And I just wanted to clarify what that means because you took a €34 million write-down in H1. Does that mean that we can expect to come back to around €15 million? Or does that mean something else for H2 in the future?
My second question is about your tenant departure. You had a lot of tenants exercising their lease -- their black options -- sorry, in this year. You've got 16% of leases potentially expiring in 2025. And I was wondering if you expect such high amount of departure as well or if you already have some visibility?
And my last question is about your project in Lyon and in Plessis. I was wondering if you could share some profitability number, so we can understand the sort of math behind repositioning this asset from office to residential? Thank you.
Nicolas Joly
Okay. Thank you, Valerie. Well, maybe to start with the property development. Well, as you saw, so due to the uncertainty of the global environment and what we've observed through our discussion with institutionals on sale, we indeed run this comprehensive review of the portfolio. That led to the significant impairment loss we just shared. This is a one-off impact.
So therefore, we do not expect additional deterioration of the net current cash flow in H2. So to answer your question, this should lead to a mechanical increase of the margin rate at the end of the year compared to the figures shared for the first semester.
Globally, I would say that, even if there can be some positive sign in development activities with individual, we think that those signs need to be confirmed, first. Secondly, that we are going through the complex environment for political tax and economic point of view.
And in our view uncertainties shall need to greater selectivity in our project. So that's what we do. That's what we did with the operational launches in the H1, as you saw. And that's what we intend to do for the months to come.
Maybe to keep on talking about property development coming to your third question, on the to-be-repositioned asset that has been bought from Icade promotion, we do not usually share the specific figures, but the idea especially because we also have some third-party involved, for example, in Plessis-Robinson is to do so at market practice.
So there's profitability for Icade promotion on this operation in line with the usual on the market. And it's indeed worth pointing out that we were able to do so by selling the asset at the NAV.
And as for your second question, let's say, related to the expiry schedule on the Investment division. Well, it was important for us to share with you from the start as much visibility as we had on the leasing expiry schedule, already €16 million of rent losses has been indeed crystallized over the H1.
As we've always said, most of the break option and expiries rather concerned the H2 indeed, that's the reason why we expect the total amount on this semester above €30 million of land losses out of the €37 million; due to the fact that those losses are mostly due to-be-repositioned assets and the one specific asset of Pulse building hosting the Olympic Committee.
Well, of course there are some challenges still ahead in 2025. But the major part was on 2024 on the expiry schedule. But have in mind once again that due to the fact talking about the earnings, due to the fact that most of the departures are in H2 2024. Of course it will slightly widen the earnings in 2024, but also have a full year impact on the earnings in 2025.
Valerie Jacob
Thank you.
Nicolas Joly
You're welcome.
Operator
We will now take our next question from Celine Soo-Huynh from Barclays. Please go ahead.
Celine Soo-Huynh
Hi, Nicolas. I got two questions for you. The first one is that, if we analyze the H1 net current cash flow, it seems to be running slightly unrelated guidance? And you also said that the net current cash flow in H2 should not be lower than in H1. So is there a chance of a bit here at full year? Or why are you being extra cautious?
And the second question is on Icade promotion. The land profit value was written down by 9%, in H1. If pricing remains the same as today, what kind of profit margin would you expect going forward? In other words, did you write down that land profitability to be able to generate a profit going forward? Thank you.
Nicolas Joly
Yes. Hello, Celine, thank you for your question. Well, regarding the guidance, I'd say that, from the start and I think we were pretty clear with Christelle on that, we were really cautious in defining the guidance given the uncertainty on the context especially, on the property development operations. So that was the reason why we were able to offset that and reaffirm the guidance.
There were also some positive results helping to offset those significant losses in H1, coming from the efforts made on the operational cost management. Also as you saw better performance on the Investment division and the financial product, from where we stand today we now have stronger visibility on the H2.
Of course, we've also secured most of the net current cash flow coming from the discontinued activity. So that's the reason why we are able to confirm the guidance.
Nevertheless, as I said earlier talking about the property development, we really think that we are facing some uncertainty globally politically speaking on the tax and economic point of view. So that's the reason why we are still thinking to -- we need to be cautious but we are confident in the guidance being maintained as of today.
Christelle De Robillard
Regarding your second question in terms of Icade Promotion depreciation and the impact of the margin. So as you understood during our presentation those impairments are the result of an exhaustive and in-depth portfolio review to take into account the current end variants and particularly regarding bulk sales.
It conducted us to make an impairment on more than 200 projects out of 500 total projects. So that is to say nearly 40% of our portfolio. If the current macroeconomic political environment doesn't sell that is to say under ISO condition, we can consider that all provision has been accounted during this first half semester.
As Nicolas explained, we don't expect further deterioration of net cash flow in H2. So mechanically it will lead to an increase of the margin rate at the end of 2024 even is once again as we are evolving in cautious -- in political environment, which is still uncertain we remain cautious for the following months.
Celine Soo-Huynh
Sorry. Thank you so much. Can I follow-up with another one regarding your government in France? Do you -- are you getting any signal from the new government on some kind of return of subsidies to help France builders that are not doing great at the moment?
Nicolas Joly
No honestly, we don't. It's really too early to have some signal even more globally frankly. What we've observed during the past week is that it didn't have a strong impact on the activity even if it was a really short period of time. But on the property development business there was no major change on individual behavior.
And as for the property investment division as you saw, we managed to sign as planned on the timing plan the two presale agreements we had in mind. So no major change in the short-term, but it's really too early to tell to have some signals and to have a proper view of what to expect in the months to come.
Celine Soo-Huynh
Right. So Nicolas but you're kind of saying as well that we've gone through the worst for and commercial on the only ways off right?
Nicolas Joly
Well, I really prefer to be cautious, we’ll be more and more selective. We'll be focusing as you saw on new operations, taking in account the new environment criteria, focusing on the project with the good margin, high level of pre-commercialization. But have in mind that the political agenda in France is still uncertain.
Soon it will also be the municipal election in the town, so all this uncertainty definitely is not favorable to business in our view. So that's the reason why we keep paying attention on our cost and everything and the selection of the operations. So in my view too early to tell the worst is behind us.
Celine Soo-Huynh
Thank you.
Nicolas Joly
Welcome.
Operator
We will now take our next question from Florent Laroche-Joubert from ODDO BHF. Please go ahead.
Florent Laroche-Joubert
Yes, sir. Good morning, Nicolas. Good morning, Christelle. Can you hear me?
Nicolas Joly
Yeah. Very good. Good morning, Florent.
Florent Laroche-Joubert
Hello Nicolas. Hello, Christelle. Can you hear me?
Nicolas Joly
Yeah. Sure, sure.
Florent Laroche-Joubert
Okay. So good morning. Yes, I would have two questions. My first question will be on the occupancy rate in the office is well-positioned and on the like industrial. So you have had good leasing activity in the semester. But however the occupancy rates for these two segments has decreased. And so I would like to know if we could have maybe more color on that. And my second question would be on the valuation of the assets maybe for H2. How do you see the next evolution for us in terms of valuation of these assets?
Nicolas Joly
Yes. Good morning again, Florent. Thanks for your questions. Well about the occupancy rate. Well, globally on the two main asset class well-positioned in light industrial it maintained itself above 90%. So I mean it's all usual I would say. But have in mind that it will be also impacted especially the well-positioned offices by the departures of the Olympic Committee on the Pulse building. We have a deep conviction in this asset. That's the reason why it's well-positioned. But of course it will impact the occupancy ratio at the end of the year. So just to give you some perspective on that.
And as for the valuation of the asset maybe, first of all, a reminder from where we come from over the -- since the peak in June 2022 over those two years. So the global adjustment for Icade was minus 26%. So quite significant. Of course it varies from one asset class to another. I think the -- to be reposition asset has been homes cut by half. The exact figure is minus 46%. So close now to €2000 per square meter on this asset class so quite significant.
We saw that the adjustment is really slowing down in H1 compared to the last period. So definitely main part of the adjustment is behind us. I think the valuators did great job restoring the risk premium. And have in mind also I really think that's one of Icade's specificities that two-third of our portfolio is going through a double check expertise process. So this gave some comfort also to us on the figures.
From what is ahead of us I say that the first point we're still depending of course on Central Bank's decision and inflation data, but would appear hopefully that the rate cut is underway hopefully. Nevertheless, we remain also cautious as of course some of the value adjustments still possible from one asset class to another on the second semester. But clearly the main part is behind us now. And you see that what we've been able to achieve in Marseille that we are finding some liquidity on some well-positioned assets too.
Operator
Thank you. We will now move to our next question from...
Florent Laroche-Joubert
That now you see some appetite of investors – do you hear me?
Nicolas Joly
Well, yes. Yes, yes, we hear you well. Do you hear me?
Florent Laroche-Joubert
Yes, yes. I'm here.
Nicolas Joly
Okay. So to answer your question yes, we saw some appetite for example on...
Florent Laroche-Joubert
My follow-up question -- yes I can hear you.
Nicolas Joly
Okay. So we saw some appetite from investors on the Marseille assets marketing. For example, we had for each asset four to five offers. So there some appetite back. But still bear in mind the global figures we've shared on the investment market still remaining very sluggish in a hole. So slightly better, but definitely we are still facing headwinds.
Florent Laroche-Joubert
Okay. Thank you very much.
Nicolas Joly
Thank you, Florent.
Operator
Thank you. We will now move to our next question from Marc Mozzi from Bank of America. Please go ahead.
Marc Mozzi
Very good morning, everyone. I have some follow-up question on different topics we've addressed during this Q&A. The first one is I'm not sure to understand precisely what has been your leasing spread i.e. the new rent difference versus the passing rounds portfolio.
Nicolas Joly
Yes. You want -- I can take the question one by one if you want Marc. So on this one what I said what we've observed on the reversion crystallize I would say lease by lease is roughly in line with the overall negative reversion potential of minus 8.7% shared during the first quarter. So globally, we signed an ARV crystallizing lease by lease this reversionary potential and we are in line with the market. Does that answer your question?
Marc Mozzi
So minus 9% is the same number for H1 than for Q1?
Nicolas Joly
Yeah, yeah. Roughly. Of course, those are average numbers. So sometimes you can -- we can achieve better, sometimes we can achieve a bit lower than that. But on average we'll stick to this.
Marc Mozzi
Okay.
Nicolas Joly
Okay.
Marc Mozzi
That's clear. On your net current cash flow, I'm just trying to get my head around what has been the big moving parts. So you -- if I'm correct, you've been achieving a better top line from your investment properties, so meaning the rental business. You have reduced cost. You have greater income from your cash. And finally, you have this negative impact from your negative margin from your property development. And overall, that helps you to maintain your net current cash flow guidance for the year. That's the way I should understand it?
And just trying to make my head around what's going to happen in H2, because if we have less indication in H2, but the same 9% negative reversion, potentially flattish if I understand correctly results from your development activity, no more cost reduction and same number in terms of income about profit from your cash position. I'm just trying to understand how the math worked for not having the minus 34% impact on your property development, not having any impact on your overall guidance for the year? Just trying to get some clarity here.
Nicolas Joly
Well, to answer your question, I think that was a good wrap up. Maybe just on top of that, have in mind when defining the guidance, initially we were pretty clear on the fact that we decided to be cautious on this guidance. So this cautiousness also offset a part of the impairment that we've crystallized. But once said that, indeed you get some positive results on the activity on the investment division, some efforts on the cost management and our cost structure, and, of course, some strong financial products, especially better than expected because due to a delay in the decreasing of the interest rates and those offset indeed a major part of the impairment from the property development.
As for the second semester, well, mechanically, as this impairment or one-off impact that's what we said as for the Property Development division should get better a bit during the H2 because we do not intend to reconduct some new impairment loss specifically on the property development. So that should help. And on the other hand, on the Investment division, of course, it will slow down a bit due to the fact that we have some departures on the one hand and that the financial products should lower B2. That's for the point.
Regarding the attention we pay on the cost, being our cost structure or the vacancy cost, I mean, it's permanent attention we have on field and the teams are committed to achieve some efforts on that. And we still will being able to adapt also to the global environment evolution. Does that answer all your questions?
Marc Mozzi
Yeah. And I have two follow-up questions on that one. Number one is, what has been your like-for-like rental growth that on a net basis? This is a question I've been asking in Q1 just to make sure that we're not having any leakage between growth on that.
Nicolas Joly
Yeah. Yeah, I know you keep asking the question, so I will keep giving the same answer. That's not something we are focusing on, but we are focusing on the vacancy costs. Maybe Christelle, if you want to complement a bit on this.
Christelle De Robillard
Yeah. Maybe to give you some color Marc on the like-for-like net rental income. So first of all, you saw that there is an improvement in gross rental income, so mainly driven by indexation and good performance of well-positioned assets and light industrial. So that's the first driver.
The second driver is indeed a slight improvement in cost. We noticed a decrease in energy costs, which played positively on the vacancy costs. And on top of that, we also had some one-off improvements and some other expenses like tax rebates especially.
All-in-all, we'll continue, as Nicolas was just mentioning, to monitor closely the cost over the next months, maybe to give you some color about the months to come. We will have something in departure expected in H2 as we expand. So, mechanically, we are expecting an increase in vacancy costs. But at this stage at end of H1, we had a slight improvement.
Marc Mozzi
Okay. And the final one is -- I have two more. The next one is on EPRA earnings. You're not providing any EPRA earnings.
Christelle De Robillard
Yes we are.
Marc Mozzi
Okay. Sorry it's been a very busy morning.
Christelle De Robillard
So, you have a specific question on all EPRA KPI, so you -- don’t hesitate if you don’t sign it, but you will normally you should.
Marc Mozzi
And everything you mentioned as earnings is post minority?
Nicolas Joly
Sorry Marc, could you--?
Marc Mozzi
Non-controlling interest that way.
Christelle De Robillard
We specified so maybe as you will see if you haven't seen it yet, we conducted and existed review of our KPI and for each KPI, we precise the scope of calculation. So, normally you will find it for EPRA earnings. It's really in compliance with EPRA recommendation, so after minority if I'm not mistaken.
Nicolas Joly
Yes. And on the EPRA earnings, Marc, it's on Page 24, 25 of the press release.
Marc Mozzi
Okay. Brilliant. I'll look at it. And the final one is on your net debt to EBITDA, which is now skirting to above 11 times. Is there any ongoing discussion with your credit agencies around it?
Christelle De Robillard
We have a current discussion with credit agency S&P. Maybe you saw by the way that our current rating was reaccelerated a few days ago. And normally we are expecting a retracement by S&P of the impairment booked on the Property Development side. It was the case for other peers because it is one-off effect.
Marc Mozzi
Okay. So, the restatement of your rating has been based included as kind of impairment, you've had, do they agree to take on board that this is a one-off and that does not deteriorate your financial KPIs?
Christelle De Robillard
We gave them some color about all that. So, yes, it took into account the 11.
Marc Mozzi
Okay. That’s it from me. Thank you very much. Thank you for holding the phone.
Nicolas Joly
Thanks Marc. No, no, pleasure.
Operator
Thank you. We will now move to our next question from Adam Shapton from Green Street. Please go ahead.
Adam Shapton
Good morning team. Thanks for the presentation and taking the question. Two quick ones on healthcare disposals. On the Italian portfolio being marketed, is that sold will that – what proportion of the shareholder loan would that cover, would that cover all of it or a proportion of it? And the second question is just on dividends from healthcare. Are you confident that those dividends will be stable or growing next year? Obviously, there's plenty going on in the healthcare market in terms of operations. To the extent that you still own those states next year and maybe the year after, are you confident that the dividends will remain at least stable?
Nicolas Joly
Yes. So maybe on the second question about the dividend. Of course, it has to be a decision from the Board of the dedicated SPV. What we can say is that, as we said this is resident asset class. Those assets are fully let. They are delivering some steady predictable cash flow. So fortunately dividends will follow. And I mean it's globally shared between the shareholders to have some dividend coming from those SPV. So we don't have precise figures but that's the overall philosophy on that. And on your first question, you were talking about valuations or a disposal sorry, I couldn't hear you well.
Adam Shapton
So just on the Italian portfolio the IHE portfolio, what proportion of IHE does that represent?
Nicolas Joly
Yes it's roughly 40% of the international SPV, roughly.
Adam Shapton
Okay. So that would – so a successful sale of that portfolio would mean shareholder loan was fully repaid.
Nicolas Joly
Well, it depends and I also have to be shared with the existing minority shareholder. But all in all, it's a significant part of the international SPVs portfolio definitely, yes.
Adam Shapton
Okay. Understood. That was it. Thanks a lot.
Nicolas Joly
Thank you.
Operator
Thank you. [Operator Instructions] We will now take our next question from Jonathan Kownator from Goldman Sachs. Please go ahead.
Jonathan Kownator
Good morning. Thank you for taking my question. Just two follow-up questions, please. One on the property development. So you indicated that you revalued quite a number of projects. Do you expect to launch less projects from here and do you expect lower volumes? And if that's the case, would have had an impact already in the next year? Or is it like a two-year lag to think about? That's question number one.
And number two, you've indicated a good leasing momentum. Obviously, it remains a tough market. You had indicated already at the Capital Markets Day, obviously departures for assets to be repositioned. So interesting to understand any change versus your expectations at the Capital Markets Day? Are you leasing better than you expected? Or are you anticipating now additional departures in 2025 amongst other? Thank you.
Nicolas Joly
Yes. Well, on the prop – thank you, Jonathan. Good morning. Well, on the property development indeed we went through this comprehensive review. Now we are – as I said, we are deeply convinced that certainty shall lead to greater selectivity. And as you saw, the one project we launched were below – above sorry, above 80% pre-commercial -- 80% rate. We've delayed and postponed, I think minus 40% of the operation launched in H1 compared. So we are definitely much more selective. We are focusing on the margin now.
Now that we've based indeed through this review, our expectation taking into account the new normal I would say. So we are not obsessed by the top line and turnover. We have a focus also on the margin. So, of course, there might be a slight decrease in the turnover, in the year to come. After that on the mid, long-term it's really hard to say from what I said for the global political environment, the municipal elections that are coming on. Our main focus is on selectivity once again.
Jonathan Kownator
Okay. And so the impact you're saying is rather than next year as opposed to this year?
Nicolas Joly
Yeah. Usually we are pushing ahead of something like 12 to 18 months of activity through backlog. The backlog is slightly down, I think minus 7%. The housing backlog roughly stable I think 0-minus [ph], but we are slowing down on the commercial part, especially office development. We had much some strong activity. Those are delivered now, most of them. Nevertheless we were able to manage to sign two interesting office development in Lyon and Villeurbanne. But globally I think the backlog on the commercial part is minus 35%, something like that. So that's for the activity to come.
And as for the leasing momentum -- on the Investment division, well that's what we've said with Crystal roughly we are in line with what we shared with the market in terms of reversionary potential to be fully transparent with you if you are looking a bit ahead of us, I think the gap between the current rent and the RV might slightly widen a little due to the fact that there are still some strong indexation this year as you know 5.5% pushing up the existing rents. And, of course, the EBITDA are stabilizing or doing well but not at the same pace. So I'd say that apart from that, we are in line because we always sign at the ERV or above. That's global for that.
And as for the departure we knew it was a major issue for us but also for you to try to assume some numbers in the future. So we try to give you as much EBITDA as possible in February and we came with this at least €40 million of certain departures. Now we have more visibility after our next semester. And so on top of those certain departures at the end of last year, of course, we've crystallized some additional ones and that's where we stand today, 16 million crystallized over H1. And we think the total element on H2 that might be above an extra €30 million. That's our view on that.
Jonathan Kownator
Okay. Very helpful. Thank you.
Operator
Thank you. There are currently no further questions in the phone queue. Please go ahead sir.
Nicolas Joly
Yeah. It's been a good discussion. Thanks for your question. We, of course, remain at your entire disposal with the whole team to answer any additional questions you might have. Happy to give you answers on that. And thanks for this discussion, looking forward to seeing you again in the coming days. Thank you very much.
Operator
Thank you. This concludes today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.