Earnings Release • Jan 25, 2024
Earnings Release
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| NSI HIGHLIGHTS | 3 |
|---|---|
| CEO COMMENTS | 4 |
| INCOME, COSTS AND RESULT | 5 |
| REAL ESTATE PORTFOLIO | 6 |
| BALANCE SHEET, NAV AND FINANCING | 10 |
| CONSOLIDATED FINANCIAL INFORMATION | 11 |
| EPRA KEY PERFORMANCE MEASURES | 17 |
| GLOSSARY | 19 |
| Publication annual report 2023 | 8 March 2024 | For additional info please contact: |
|---|---|---|
| Publication trading update Q1 2024 | 18 April 2024 | NSI N.V. |
| Publication trading update H1 2024 | 17 July 2024 | Investor Relations |
| Publication trading update Q3 2024 | 16 October 2024 | |
| Laura Gomez Zuleta | ||
| AGM | 19 April 2024 | T +31 (0)20 763 0300 |
| Ex-dividend date (final dividend 2023) | 23 April 2024 | E [email protected] |
| Record date | 24 April 2024 | |
| Payment date | TBC | Publication date: |
25 January 2024
| 2023 | 2022 | Change | |
|---|---|---|---|
| Net rental income | 58,421 | 59,325 | -1.5% |
| Net rental income - like-for-like | 58,014 | 54,849 | 4.6% |
| Direct investment result | 40,402 | 42,733 | -5.5% |
| Indirect investment result | -182,772 | -74,103 | 146.6% |
| Total investment result | -142,370 | -31,370 | 353.8% |
| EPRA earnings per share | 2.01 | 2.15 | -6.6% |
| Weighted average number of ordinary shares outstanding | 20,117,872 | 19,869,975 | 1.2% |
| EPRA cost ratio (excl. direct vacancy costs) | 29.1% | 27.8% | 1.3 pp |
| 31 December 2023 31 December 2022 | Change | ||
|---|---|---|---|
| Investment property | 1,028,801 | 1,259,235 | -18.3% |
| Net debt | -344,443 | -365,480 | -5.8% |
| Other assets / liabilities | 25,524 | -6,746 | -478.4% |
| Equity | 709,882 | 887,008 | -20.0% |
| EPRA NTA per share | 35.30 | 44.17 | -20.1% |
| Number of ordinary shares outstanding | 20,155,221 | 20,054,240 | 0.5% |
| Net LTV | 33.0% | 28.7% | 4.4 pp |
| 2023 | 2022 | Change | |
|---|---|---|---|
| CRREM building energy intensity (kWh/sqm/year)2 | 130 | 136 | |
| EPC-label (percentage portfolio with label A or better) | 95% | 88% | |
| GRESB score | 94 | 93 |
| 31 December 2023 | ||||||
|---|---|---|---|---|---|---|
| Amsterdam | Other G4 | Other NL | TOTAL | 31 December 2022 | Change | |
| Number of properties | 22 | 14 | 10 | 46 | 49 | -6.1% |
| Market value (€ m)3 | 588 | 301 | 154 | 1,043 | 1,275 | -18.2% |
| Lettable area (sqm k) | 160.7 | 125.0 | 64.9 | 350.7 | 382.1 | -8.2% |
| Annualised contractual rent (€ m)4 | 39 | 26 | 12 | 77 | 78 | -0.9% |
| ERV (€ m) | 44 | 27 | 13 | 84 | 88 | -5.4% |
| EPRA net initial yield | 5.2% | 5.7% | 5.0% | 5.3% | 4.6% | 0.8 pp |
| Gross initial yield | 7.4% | 8.6% | 8.1% | 7.9% | 6.4% | 1.5 pp |
| EPRA vacancy | 5.8% | 6.0% | 1.5% | 5.2% | 6.2% | -1.1 pp |
| Wault | 4.1 | 3.5 | 2.9 | 3.7 | 3.9 | -6.0% |
1 These preliminary results are unaudited.
2 2022 figure has been restated to reflect accurate number of square meters. This figure excludes sold assets and developments.
3 Reported in the balance sheet at book value including right of use leasehold (IFRS 16), excluding lease incentives and part of NSI HQ (own use).
4 Before free rent and other lease incentives.
At the end of 2023 NSI, with a modest 5.2% vacancy rate, 95% of the portfolio EPC label A or better, a LTV of 31.5% (pro forma), an undemanding gross yield of 7.9%, no capital commitments, a portfolio still full of opportunities and an excellent team ready to drive performance, is very well placed.
2023 proved a robust year operationally, with healthy leasing activity driving record occupancy, like-for-like rental growth of 7.4% and new leases signed on average 2% ahead of ERV.
Given the still muted economic outlook for 2024, we will first and foremost have to make sure that the portfolio continues to perform. Further asset pruning, to increase the focus on Amsterdam, will help drive the overall performance, as will additional targeted investments in sustainability and services.
Following a period of intensive discussions, in January 2024 NSI agreed the sale of the existing Laanderpoort building, together with the plans, permits and agreements for its redevelopment, to ING for a total amount of €24m.
We are pleased with this transaction. Not only is it testament to the quality of the development team (delivering a 'ready to start' project to ING), but it also has released NSI of a sizeable commitment, thereby allowing the pursuit of more profitable investment opportunities elsewhere.
Given the sale of Laanderpoort in combination with the strong balance sheet position, we now feel comfortable to allocate €20m to a share buy-back programme.
Legislation has now been passed such that as of 2025 FBI's can no longer directly invest in Dutch real estate. NSI NV intends to remain an FBI at least up to the end of 2024. Yet, in 2023 NSI has executed the necessary restructuring to limit the negative impact of this legislative change.
As a result of the restructuring NSI will start to pay some tax in 2023 (ca 2%) and in 2024 (ca 5-7%). The tax rate beyond 2024 may be higher, dependent on likely further changes to the tax law on interest deductibility for tax purposes, which are expected later this year. At the same time, as a result of the restructuring, a €38.7m deferred tax asset has been accounted for per December 2023.
Meanwhile, we fully support the preliminary discussions by the Dutch Government to establish a new REIT regime, but as we say in Dutch: 'flowers only at the finishing line'.
The past four years have generally been challenging for office investors everywhere. Headwinds as Covid, WFH, rising interest rates, lower valuations, high construction costs, environmental requirements and a consolidating, yet much more demanding, customer base have severely altered the business prospects for any office investor compared to the start of this decade.
For NSI – and our shareholders in particular – this has also been a painful reset period, given the changes to the FBI tax regime as well. That being said, we are confident that all of the elements are now in place for NSI to be back on the front foot.
The continued asset pruning and deleveraging in recent years, in combination with a strong focus on sustainability and services, whilst scaling back the development pipeline for now, coupled with the strategic review of the entire business in 2023, provide a sound basis for 2024 and beyond.
We continue to see the long term investment case for high quality, sustainable and amenitised offices in growth locations.
The wider office market reset will increasingly drive new opportunities as not all owner/operators have the stamina, knowledge, time or money to once again get ahead of the curve. This is particularly so for the brown-to-green conversions that are bound to be necessary to keep up with the rising trend in demand for the best product.
There is a moment to put the balance sheet to work and we are coming nearer that point. Dutch office capital values are down substantially from the peak, with NSI's own capital values down 21% over the same period, and we are starting to see deals emerge that exceed our implied cost of capital. Having said that, given prevailing market conditions we are in no rush to deploy capital at this stage.
Whilst we have scaled back development in 2023, it remains a core competency to the business. The team will continue to explore opportunities still embedded in the portfolio but, as the sale of Laanderpoort shows, we are and will remain flexible in how these opportunities are eventually monetised.
Whilst we appreciate liquidity in the market is limited at this stage, we expect the year 2024 to bring new opportunities for further asset rotation. We will also explore in more detail the possibilities to use private/JV capital for this purpose.
In line with previous guidance, we will propose to the AGM a full year dividend of €1.52 per share, equating to a final dividend of €0.77 per share. This dividend will be payable in May.
We forecast a post-tax EPRA EPS of € 1.85-2.00 per share for the full year 2024, subject to further asset rotation.
Bernd Stahli
EPRA earnings in 2023 amount to € 40.4m compared to € 42.7m in 2022 (- 5.5%). The decrease in EPRA earnings is the result of lower net rental income, higher administrative and financing costs, and corporate income tax as a result of the restructuring in preparation of the legislative changes in the FBI regime as from 2025. EPRA EPS is € 2.01, 6.6% lower than last year.
EPRA NTA is at € 35.30, down 20.1% or € 8.87 per share compared to the end of 2022, primarily due to the negative revaluation of the investment portfolio in 2023.
Compared to last year gross rental income is flat, at € 71.2m. The positive effect of indexation was offset by the effect of disposals in the past two years (- € 2.7m) and the transfer of Laanderpoort to developments in February 2023 (- € 2.2m). On a like-for-like basis gross rental income increased by € 4.9m (7.4%), mainly due to lease indexation in H2 2022 and 2023.
Non-recoverable service costs are € 0.6m higher than in the same period last year, which is the result of higher vacancy in the first half of 2023 and of caps on charges to some tenants.
Operating costs are € 0.2m (1.8%) higher compared to 2022, with lower letting costs (- € 0.2m) and lower costs for technical consultancy (- € 0.4m) being offset by higher property taxes (+ € 0.2m) and maintenance (+ € 0.5m) costs.
Net rental income amounts to € 58.4m, down € 0.9m (- 1.8%) versus 2022. The NRI margin is 82.1%, down 1.1 bps versus last year.
Net rental income increased by 4.6% on a like-for-like basis; the increases in Amsterdam, Other G4 and Other Netherlands were respectively 3.8%, 6.0% and 4.3%.
Administrative expenses are € 0.6m higher compared to 2022, entirely due to one-off costs in relation to the announced change in tax regime.
The direct net financing costs increased by 4.0% (€ 0.3m) compared to last year, caused by higher interest costs (€ 1.3m), reflecting higher interest rates, and higher capitalised interest related to development projects (€ 1.0m).
The investment portfolio incurred a negative revaluation of € 224.0m (- 17.4% at market value) compared to the end of 2022. The result on sales concluded in 2023 amounts to € 5.4m. A negative markto-market effect on interest rate swaps (- € 2.8m) and other indirect costs (- € 0.1m) result in an indirect result before tax of - € 226.7m.
To limit the negative impact of the changes to the FBI-regime per 2025, NSI has restructured the business in 2023. As a result € 0.6m in tax will be paid on the direct result of 2023.
The tax on the indirect result amounts to € 38.7m, which has been added to deferred tax assets in the balance sheet. The total indirect result amounts to € 182.8m negative.
On 24 January the sale and transfer of Laanderpoort to ING was completed, for a total amount of € 24.0m. This is in line with the year-end valuation of the asset.
| 2023 | ||||||
|---|---|---|---|---|---|---|
| Other | ||||||
| Amsterdam | Other G4 | Netherlands | Corporate | TOTAL | 2022 | |
| Gross rental income | 35,600 | 24,185 | 11,415 | 71,199 | 71,309 | |
| Service costs not recharged | -1,083 | -864 | 21 | -1,926 | -1,322 | |
| Operating costs | -5,182 | -3,966 | -1,704 | -10,852 | -10,663 | |
| Net rental income | 29,335 | 19,355 | 9,731 | 58,421 | 59,325 | |
| Administrative costs | -9,120 | -9,120 | -8,566 | |||
| Earnings before interest and taxes | 29,335 | 19,355 | 9,731 | -9,120 | 49,301 | 50,759 |
| Net financing result | -8,349 | -8,349 | -8,024 | |||
| Direct investment result before tax | 29,335 | 19,355 | 9,731 | -17,469 | 40,953 | 42,735 |
| Corporate income tax | -550 | -550 | -2 | |||
| Direct investment result / EPRA earnings | 29,335 | 19,355 | 9,731 | -18,019 | 40,402 | 42,733 |
Three assets were sold during 2023: HNK Den Bosch, HNK Ede and Donauweg, Amsterdam. The combined proceeds of these disposals were € 33.9m (before transaction costs) reflecting on average a 19.8% premium over December 2022 book values. No acquisitions were made in 2023.
| # Assets | Market value (€ m) |
Market value (%) |
|
|---|---|---|---|
| Amsterdam | 22 | 588 | 56% |
| Other G4 | 14 | 301 | 29% |
| Other Netherlands | 10 | 154 | 15% |
| TOTAL | 46 | 1,043 | 100% |
The EPRA vacancy at the end of 2023 is 5.2%, down from 6.2% at the end of 2022. On a like-for-like basis the vacancy decrease was -0.3%.
The vacancy rate at year-end includes 0.7% strategic vacancy for Alexanderpoort, Rotterdam, part of which is being kept vacant ahead of a refurbishment. Adjusted for this, the vacancy rate at year-end of 2023 is 4.5%.
The total tenant retention rate for 2023 was lower than usual, at circa 57%.
| Dec. 2022 | L-f-l | Other | Dec. 2023 | |
|---|---|---|---|---|
| Amsterdam | 7.0% | 0.1% | -1.3% | 5.8% |
| Other G4 | 6.1% | -0.2% | 0.0% | 6.0% |
| Other Netherlands | 4.1% | -2.0% | -0.5% | 1.5% |
| TOTAL | 6.2% | -0.3% | -0.7% | 5.2% |
On a like-for-like basis, gross rents are up by 7.4% in 2023. Indexation accounted for most of the increase (6.4%).
| 2023 | 2022 | L-f-l | |
|---|---|---|---|
| Amsterdam | 35.5 | 33.3 | 6.8% |
| Other G4 | 24.0 | 22.1 | 8.3% |
| Other Netherlands | 11.3 | 10.5 | 7.2% |
| TOTAL | 70.8 | 65.9 | 7.4% |
Net rents increased by 4.6% on a like-for-like basis in 2023. The more limited increase was mainly a result of higher scheduled maintenance costs in 2023.
| 2023 | 2022 | L-f-l | |
|---|---|---|---|
| Amsterdam | 29.8 | 28.7 | 3.8% |
| Other G4 | 19.0 | 17.9 | 6.0% |
| Other Netherlands | 9.2 | 8.8 | 4.3% |
| TOTAL | 58.0 | 55.5 | 4.6% |
In 2023 ERVs increased by 1.9%. In Amsterdam the highest increase in ERVs was recorded in the more inner city locations (2.5%). In Other G4, Utrecht had the highest increase with 2.5% and in Other NL, Leiden ERV's were up most at 5%.
| Dec. 2023 | Dec. 2022 | L-f-l | |
|---|---|---|---|
| Amsterdam | 44 | 43 | 1.4% |
| Other G4 | 26 | 26 | 2.1% |
| Other NL | 13 | 13 | 3.2% |
| TOTAL | 83 | 81 | 1.9% |
As per 2023 the investment portfolio is 2.4% reversionary, down from 6.1% at year-end 2022. This is mainly the result of higher contract rent levels, mostly attributable to indexation. Amsterdam remains the most reversionary segment (5.2%).
New lease contracts were signed on average at approximately 2% above ERV in 2023.
| Dec. 2023 | Dec. 2022 | |
|---|---|---|
| Amsterdam | 5.2% | 11.0% |
| Other G4 | -3.0% | -0.6% |
| Other NL | 4.1% | 3.6% |
| TOTAL | 2.4% | 6.1% |
The WAULT of the portfolio is 3.7 years. Contracts representing an annualised rental income of € 12.2m (16% of total annualised rental income) are set to expire in 2024. This includes €3.8m in flexible lease contracts with maturities of one to three months, which typically are just rolled over.
The EPRA net initial yield is up by 70bps to 5.3% in 2023. This reflects both yield expansion and the impact of higher rents. The higher interest rate environment has resulted in a dearth of liquidity in the investment market prompting appraisers to take a more conservative stance to reflect this.
| EPRA net initial | Gross initial | Reversionary | ||||
|---|---|---|---|---|---|---|
| yield | yield | yield | ||||
| Dec. | Dec. | Dec. | Dec. | Dec. | ||
| 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | |
| Amsterdam | 5.2% | 4.4% | 7.4% | 5.9% | 8.3% | 7.0% |
| Other G4 | 5.7% | 4.9% | 8.6% | 7.2% | 8.9% | 7.6% |
| Other NL | 5.0% | 4.6% | 8.1% | 7.0% | 8.6% | 7.5% |
| TOTAL | 5.3% | 4.6% | 7.9% | 6.4% | 8.5% | 7.3% |
The portfolio valuation is down by 17.4% over the 12-month period (-16.9% excluding development properties.). H1 saw a revaluation of -9.1%, with H2 seeing the remainder of the decline to reflect deteriorated market conditions and continued lack of liquidity.
The valuation decline is almost entirely attributable to yield expansion as a result of higher interest rates and the collapse in investment volumes. The largest capital value decline was seen in Amsterdam (-20.7%), given the lower starting yields.
The weakness in the investment market extends beyond offices, as our Leiden Bio-Science Park assets contributed most to the valuation decline in "Other G4", with a 13% decline in capital values in 2023.
| Market | Revaluation | ||||
|---|---|---|---|---|---|
| value (€ m) | Positive | Negative | TOTAL | % | |
| Amsterdam | 588 | -154 | -154 | -20.7% | |
| Other G4 | 301 | -45 | -45 | -13.1% | |
| Other NL | 154 | -26 | -26 | -12.8% | |
| TOTAL | 1,043 | -225 | -225 | -17.4% |
Capex is € 19.5m of which € 2.4m is defensive. The € 15m of offensive capex includes € 5.5m for the development projects.
| Offensive | Defensive | TOTAL | |
|---|---|---|---|
| Amsterdam | 12.3 | 2.7 | 15.1 |
| Other G4 | 3.1 | 1.0 | 4.1 |
| Other NL | 0.2 | 0.2 | 0.3 |
| TOTAL | 15.6 | 3.8 | 19.5 |
Vacancy decreased from 7.0% to 5.8% as a result of the disposal of Donauweg in Q3 2023, which was entirely vacant, as well as occupancy gains in HNK Zuidoost and Centerpoint II.
The tenant retention rate during 2023 was 57%.
| 2023 | 2022 | Change | |
|---|---|---|---|
| Number of properties | 22 | 23 | -4.3% |
| Market value (€ m) | 588 | 730 | -19.5% |
| Market value asset (€ m) | 27 | 32 | -15.9% |
| Lettable area (sqm k) | 161 | 178 | -9.7% |
| Ann. contract rent (€ m) | 39 | 40 | -1.7% |
| Average rent / sqm | 259 | 243 | 6.7% |
| ERV (€ m) | 44 | 47 | -8.1% |
| EPRA vacancy | 5.8% | 7.0% | -1.2 pp |
| EPRA net initial yield | 5.2% | 4.4% | 0.8 pp |
| Gross initial yield | 7.4% | 6.0% | 1.5 pp |
| WAULT | 4.1 | 4.1 | -0,5 pp |
The EPRA vacancy rate for Other G4 is 6.0%, down from 6.1% at year-end 2022. The vacancy includes 2.2% in strategic vacancy for Alexanderpoort, where several floors are being held vacant as part of a major refurbishment.
Alexanderhof was let to the Rotterdam Municipality in 2023 and is now reclassified as investment property.
The retention rate for 2023 amounts to 42.7%.
| 2023 | 2022 | Change | |
|---|---|---|---|
| Number of properties | 14 | 14 | |
| Market value (€ m) | 301 | 342 | -12.0% |
| Market value asset (€ m) | 21 | 24 | -12.0% |
| Lettable area (sqm k) | 125 | 122 | 2.6% |
| Ann. contract rent (€ m) | 26 | 24 | 6.9% |
| Average rent / sqm | 220 | 213 | 3.6% |
| ERV (€ m) | 27 | 26 | 4.4% |
| EPRA vacancy | 6.0% | 6.1% | -0.1 pp |
| EPRA net initial yield | 5.7% | 4.9% | 0.8 pp |
| Gross initial yield | 8.6% | 7.2% | 1.5 pp |
| WAULT | 3.5 | 4.0 | -13.5% |
The vacancy rate was 1.5%, down from 4.1% at year-end 2022. The vacancy in Life Sciences assets in Leiden remains 0%.
The retention rate in this segment is 83.7%.
| Dec. 2023 | Dec. 2022 | Change | |
|---|---|---|---|
| Number of properties | 10 | 12 | -16.7% |
| Market value (€ m) | 154 | 203 | -24.1% |
| Market value asset (€ m) | 15 | 17 | -8.9% |
| Lettable area (sqm k) | 65 | 82 | -21.0% |
| Ann. contract rent (€ m) | 12 | 14 | -11.9% |
| Average rent / sqm | 195 | 180 | 8.6% |
| ERV (€ m) | 13 | 15 | -13.7% |
| EPRA vacancy | 1.5% | 4.1% | -2.5 pp |
| EPRA net initial yield | 5.0% | 4.6% | 0.4 pp |
| Gross initial yield | 8.1% | 7.0% | 1.1 pp |
| WAULT | 2.9 | 3.3 | -11.5% |
In line with the prevailing difficult overall market conditions, NSI has revisited the risk/return prospects of its developments and decided to scale back its near-term initiatives.
Laanderpoort was sold to ING in January 2024 for € 24m, which is the price for the existing Laanderpoort buildings, along with the plans, permits and agreements for its redevelopment.
Vitrum has been leased on a flexible basis to generate some rental income, whilst the legal process to obtain permits for the redevelopment continues to be pursued.
The decision to postpone the Well House project was made in late 2022 and the project remains suspended until further notice.
At year-end 2023 both the Laanderpoort and Vitrum assets were included in IPUC, as well as the accumulated capitalised costs for Well House.
| TOTAL | |
|---|---|
| Balance 1 January 2023 | 59.1 |
| Capital expenditure (Investments) | 5.5 |
| Capitalised interest | 2.4 |
| Revaluation | -31.2 |
| Transfer from / to operation | 23.5 |
| Balance 31 December 2023 | 59.2 |
| Market value 31 December 2023 | 59.0 |
The share of Label A Energy Performance certificates increased to 95%, from 88% in 2023. The percentage Breeam 'Very Good' and 'Excellent' labels increased to 75% from 63% in 2023.
NSI was awarded 5 stars in the GRESB sustainability assessment for the third year running and achieved 94 points, its best score to date, making it 'sector leader at the Global and Regional levels'.
NSI also obtained EPRA's sBPR Gold award.
A++ A+ A B C D E F & G 29% 23% 29% 7% 6% 6% 2017 44% 26% 5% 6% 4% 2018 74% 12% 2020 80% 7% 10% 2% 2021 2023 65% 8% 4% 10% 13% 2022 61% 16% 3% 3% 2019
EPC energy performance certificates by value
NSI remains committed to staying below the CRREM reduction pathway for Dutch Offices. In 2023 NSI remained well below the Dutch average and reduced its energy intensity by ca 3% vs. 2022. As higher levels of efficiency are approached, marginal reductions become more difficult to achieve.
In 2023 NSI has executed a necessary restructuring to limit the negative impact of the forthcoming changes in the applicable corporate tax legislation in 2025. As a result NSI has transferred assets into (wholly-owned) separate legal entities in order to operate a model whereby NSI NV acts as an FBI with indirect investments in property.
The various property owning subsidiaries are subject to normal corporation tax as per 2023. The capital structures of the subsidiaries are comparable with the financing structure of the group. Moreover, following IFRS guidelines, the balance sheet now includes a €38.7m deferred tax asset reflecting temporary differences between the book value of assets and liabilities and their values for tax purposes.
EPRA NTA per end of December 2023 is € 711m, down 19.7% compared to the end of 2022 (€ 886m), largely as a result of a negative revaluation of the investment portfolio. Due to a small rise in the number of shares following the issuance of the stock dividend, EPRA NTA per share decreased by 20.7% from € 44.17 at the end of 2022 to € 35.30 at the end of 2023.
During the first half of 2023, NSI renewed its secured loan with Berlin Hyp for an amount of € 55m, whereby the maturity has been extended by four years from June 2023 to June 2027. An interest rate swap matching the maturity and outstanding amount on the loan has been closed at 3.3%, impacting the cost of debt.
| Dec. 2023 | Dec. 2022 | Change | |
|---|---|---|---|
| Debt outstanding | 335.0 | 353.2 | -18.2 |
| Amortisation costs | -1.4 | -1.6 | 0.2 |
| Book value of debt | 333.6 | 351.6 | -18.0 |
| Cash and cash equivalents | -0.2 | -0.2 | 0.0 |
| Debts to credit institutions | 11.0 | 14.0 | -3.0 |
| Net debt | 344.4 | 365.5 | -21.0 |
Net debt is down by € 21.0m compared to the end of December 2022. This is primarily due to disposals totalling € 33.9m (net of transaction costs) and partly offset by investments totalling € 19.5m.
At the end of 2023 NSI has circa € 290m of committed undrawn credit facilities at its disposal. The average loan maturity is 4.5 years (December 2022: 4.7 years), with no loans maturing until 2026. This ensures sufficient flexibility and capacity.
At year-end 83.6% of debt drawn is unsecured (91.2% of available debt) due to a repayment of ca € 10m at the extension of the secured loan in June (from € 65m to € 55m). The a≠verage cost of debt has increased from 2.0% to 3.2% in 2023 due to the expiration of swaps and the closing of new swap contracts, and increased (short term) interest rates.
The LTV is 33.0% at the end of 2023, 4.3 percentage points higher compared to December 2022 (28.7%), driven by negative revaluations of assets in 2023 and partly offset by lower net debt.
The ICR stands at 5.5x at the end December 2023, compared to 6.3x at the end of December 2022. This is the result of higher net financing expenses and a slightly lower NRI during 2023, due to disposals. The ICR remains firmly above the 2.0x covenant.
| Covenant | Dec. 19 | Dec. 20 | Dec. 21 | Dec. 22 | Dec. 23 | |
|---|---|---|---|---|---|---|
| LTV | ≤ 60.0% | 27.4% | 29.2% | 28.2% | 28.7% | 33.0% |
| ICR | ≥ 2.0x | 6.8x | 7.2x | 6.5x | 6.3x | 5.5x |
NSI is using swaps to hedge interest rate risk on variable rate loans. Due to the expiration of € 148m of swaps and closing only € 55m of new swaps, the volume hedge ratio has decreased to 82.1% (target range: 70-100%) from 104.0% in December 2022. The weighted average maturity for the derivatives and fixed rate loans is 4.9 years at the end of December 2023. The maturity hedge ratio is 107.7% (target range 70-120%).
( x € 1,000)
| 2023 | 2022 | |
|---|---|---|
| Gross rental income | 71,199 | 71,309 |
| Service costs recharged to tenants | 13,475 | 11,020 |
| Service costs | -15,402 | -12,343 |
| Service costs not recharged | -1,926 | -1,322 |
| Operating costs | -10,852 | -10,663 |
| Net rental income | 58,421 | 59,325 |
| Revaluation of investment property | -223,959 | -76,826 |
| Net result on sale of investment property | 5,388 | 32 |
| Net result from investments | -160,150 | -17,470 |
| Administrative costs | -9,120 | -8,566 |
| Other income and costs | -81 | -210 |
| Financing income | 37 | 278 |
| Financing costs | -8,385 | -8,302 |
| Movement in market value of financial derivatives | -2,771 | 2,902 |
| Net financing result | -11,120 | -5,122 |
| Result before tax | -180,471 | -31,368 |
| Corporate income tax | 38,101 | -2 |
| Total result for the year | -142,370 | -31,370 |
| Other comprehensive income / expense | ||
| Total comprehensive income / expense for the year | -142,370 | -31,370 |
| Total comprehensive income / expense attributable to: | ||
| Shareholders | -142,370 | -31,370 |
| Total comprehensive income / expense for the year | -142,370 | -31,370 |
| Data per average outstanding share: | ||
| Diluted as well as non-diluted result after tax (€) | -7.08 | -1.58 |
( x € 1,000)
| 31 December 2023 | 31 December 2022 | |
|---|---|---|
| Assets | ||
| Investment property | 1,028,801 | 1,259,235 |
| Intangible fixed assets | 32 | 72 |
| Tangible fixed assets | 3,835 | 4,063 |
| Financial fixed assets | 0 | 0 |
| Deferred tax assets | 38,654 | |
| Other non-current assets | 12,069 | 13,659 |
| Non-current assets | 1,083,389 | 1,277,027 |
| Debtors and other receivables | 3,963 | 1,403 |
| Derivative financial instruments | 1,163 | |
| Deferred tax assets | 70 | |
| Cash and cash equivalents | 202 | 196 |
| Current assets | 4,235 | 2,763 |
| Total assets | 1,087,625 | 1,279,790 |
| Shareholders' equity | ||
| Issued share capital | 74,171 | 73,800 |
| Share premium reserve | 915,068 | 915,447 |
| Other reserves | -136,988 | -70,868 |
| Total result for the year | -142,370 | -31,370 |
| Shareholders' equity | 709,882 | 887,008 |
| Liabilities | ||
| Interest bearing loans | 333,632 | 285,984 |
| Derivative financial instruments | 1,608 | |
| Deferred tax liabilities | 2 | |
| Other non-current liabilities | 4,533 | 3,744 |
| Non-current liabilities | 339,775 | 289,727 |
| Redemption requirement interest bearing loans | 65,656 | |
| Debts to credit institutions | 11,012 | 14,037 |
| Creditors and other payables | 26,956 | 23,361 |
| Current liabilities | 37,968 | 103,054 |
| Total liabilities | 377,743 | 392,782 |
| Total shareholders' equity and liabilities | 1,087,625 | 1,279,790 |
( x € 1,000)
| 2023 | 2022 | |||
|---|---|---|---|---|
| Result from operations after tax | -142,370 | -31,370 | ||
| Adjusted for: | ||||
| Revaluation of investment property | 223,959 | 76,826 | ||
| Net result on sale of investment property | -5,388 | -32 | ||
| Net financing result | 11,120 | 5,122 | ||
| Corporate income tax | -38,101 | 2 | ||
| Depreciation and amortisation | 638 | 739 | ||
| Movements in working capital: | 192,228 | 82,658 | ||
| Debtors and other receivables | -626 | 1,667 | ||
| Creditors and other payables | 3,403 | -1,894 | ||
| 2,777 | -228 | |||
| Cash flow from operations | 52,635 | 51,061 | ||
| Financing income received | 37 | 278 | ||
| Financing costs paid | -11,012 | -8,545 | ||
| Tax paid | -15 | 6 | ||
| Cash flow from operating activities | 41,645 | 42,800 | ||
| Purchases of investment property and subsequent expenditure | -19,469 | -12,682 | ||
| Proceeds from sale of investment property | 34,052 | 17,067 | ||
| Investments in intangible fixed assets | 0 | -31 | ||
| Investments in tangible fixed assets | -104 | |||
| Disinvestments in tangible fixed assets | 4 | |||
| Cash flow from investment activities | 14,583 | 4,255 | ||
| Dividend paid to the company's shareholders | -34,757 | -30,078 | ||
| Proceeds from interest bearing loans | 10,000 | 5,000 | ||
| Transaction costs interest bearing loans paid | -242 | -339 | ||
| Repayment of interest bearing loans | -28,200 | -43,200 | ||
| Cash flow from financing activities | -53,199 | -68,617 | ||
| Net cash flow | 3,030 | -21,563 | ||
| Cash and cash equivalents and debts to credit institutions - | -13,840 | 7,723 | ||
| balance as per 1 January | ||||
| Cash and cash equivalents and debts to credit institutions - | -10,810 | -13,840 | ||
| balance as per 31 December |
for the year ended 31 December 2023
( x € 1,000)
| Issued share | Share premium | Other reserves | Result for the | Shareholders' | |
|---|---|---|---|---|---|
| capital | reserve | year | equity | ||
| Balance as per 1 January 2023 | 73,800 | 915,447 | -70,868 | -31,370 | 887,008 |
| Total result for the year | -142,370 | -142,370 | |||
| Total comprehensive income / expense for the year | -142,370 | -142,370 | |||
| Profit appropriation - 2022 | -31,370 | 31,370 | |||
| Distribution final dividend - 2022 | 372 | -379 | -19,633 | -19,640 | |
| Interim dividend - 2023 | -15,116 | -15,116 | |||
| Contributions from and to shareholders | 372 | -379 | -66,120 | 31,370 | -34,757 |
| Balance as per 31 December 2023 | 74,171 | 915,068 | -136,988 | -142,370 | 709,882 |
| Issued share | Share premium | Other reserves | Result for the | Shareholders' | |
|---|---|---|---|---|---|
| capital | reserve | year | equity | ||
| Balance as per 1 January 2022 | 72,489 | 916,768 | -161,762 | 120,961 | 948,457 |
| Total result for the year | -31,370 | -31,370 | |||
| Total comprehensive income / expense for the year | -31,370 | -31,370 | |||
| Profit appropriation - 2021 | 120,961 | -120,961 | |||
| Distribution final dividend - 2021 | 398 | -403 | -17,464 | -17,470 | |
| Interim dividend - 2022 | 913 | -918 | -12,603 | -12,608 | |
| Contributions from and to shareholders | 1,310 | -1,321 | 90,894 | -120,961 | -30,078 |
| Balance as per 31 December 2022 | 73,800 | 915,447 | -70,868 | -31,370 | 887,008 |
| Amsterdam | Other G4 | Other NL | Corporate | TOTAL | |
|---|---|---|---|---|---|
| Gross rental income | 35,600 | 24,185 | 11,415 | 71,199 | |
| Service costs recharged to tenants | 5,706 | 5,782 | 1,987 | 13,475 | |
| Service costs | -6,789 | -6,646 | -1,966 | -15,402 | |
| Service costs not recharged | -1,083 | -864 | 21 | -1,926 | |
| Operating costs | -5,182 | -3,966 | -1,704 | -10,852 | |
| Net rental income | 29,335 | 19,355 | 9,731 | 58,421 | |
| Revaluation of investment property | -153,754 | -44,623 | -25,583 | -223,959 | |
| Net result on sale of investment property | 5,282 | -1 | 106 | 5,388 | |
| Net result from investment | -119,136 | -25,269 | -15,745 | -160,150 | |
| Administrative costs | -9,120 | -9,120 | |||
| Other income and costs | -81 | -81 | |||
| Net financing result | -11,120 | -11,120 | |||
| Result before tax | -119,136 | -25,269 | -15,745 | -20,321 | -180,471 |
| Corporate income tax | 38,101 | 38,101 | |||
| Total result for the year | -119,136 | -25,269 | -15,745 | 17,780 | -142,370 |
| Other comprehensive income / expense | |||||
| Total comprehensive income / expense for the year | -119,136 | -25,269 | -15,745 | 17,780 | -142,370 |
| Attributable to shareholders | -119,136 | -25,269 | -15,745 | 17,780 | -142,370 |
| Amsterdam | Other G4 | Other NL | Corporate | TOTAL | |
|---|---|---|---|---|---|
| Investment property | 579,683 | 296,245 | 152,873 | 1,028,801 | |
| Other assets | 6,461 | 4,615 | 992 | 46,756 | 58,824 |
| Total assets | 586,144 | 300,860 | 153,865 | 46,756 | 1,087,625 |
| Non-current liabilities | 3,128 | 932 | 198 | 335,517 | 339,775 |
| Current liabilities | 1,781 | 1,461 | 724 | 34,002 | 37,968 |
| Total liabilities | 4,908 | 2,393 | 922 | 369,520 | 377,743 |
| Purchases of investment property and subsequent expenditures | 15,056 | 4,102 | 311 | 19,469 |
| Amsterdam | Other G4 | Other NL | Corporate | TOTAL | |
|---|---|---|---|---|---|
| Gross rental income | 35,855 | 22,315 | 13,139 | 71,309 | |
| Service costs recharged to tenants | 4,667 | 4,129 | 2,225 | 11,020 | |
| Service costs | -5,188 | -4,541 | -2,613 | -12,343 | |
| Service costs not recharged | -521 | -412 | -389 | -1,322 | |
| Operating costs | -4,527 | -3,774 | -2,361 | -10,663 | |
| Net rental income | 30,807 | 18,129 | 10,389 | 59,325 | |
| Revaluation of investment property | -74,631 | -12,105 | 9,909 | -76,826 | |
| Net result on sale of investment property | 1,187 | -1,156 | 32 | ||
| Net result from investment | -43,824 | 7,211 | 19,143 | -17,470 | |
| Administrative costs | -8,566 | -8,566 | |||
| Other income and costs | -210 | -210 | |||
| Net financing result | -5,122 | -5,122 | |||
| Result before tax | -43,824 | 7,211 | 19,143 | -13,898 | -31,368 |
| Corporate income tax | -2 | -2 | |||
| Total result for the year | -43,824 | 7,211 | 19,143 | -13,900 | -31,370 |
| Other comprehensive income / expense | |||||
| Total comprehensive income / expense for the year | -43,824 | 7,211 | 19,143 | -13,900 | -31,370 |
| Attributable to shareholders | -43,824 | 7,211 | 19,143 | -13,900 | -31,370 |
| Amsterdam | Other G4 | Other NL | Corporate | TOTAL | |
|---|---|---|---|---|---|
| Investment property | 721,552 | 336,766 | 200,917 | 1,259,235 | |
| Other assets | 6,589 | 5,284 | 1,786 | 6,897 | 20,556 |
| Total assets | 728,140 | 342,050 | 202,703 | 6,897 | 1,279,790 |
| Non-current liabilities | 2,411 | 820 | 361 | 286,135 | 289,727 |
| Current liabilities | 2,458 | 785 | 575 | 99,235 | 103,054 |
| Total liabilities | 4,870 | 1,606 | 936 | 385,370 | 392,782 |
| Purchases of investment property and subsequent expenditures | 10,543 | 1,561 | 578 | 12,682 |
| 2023 | 2022 | |||
|---|---|---|---|---|
| € ' 000 | per share (€) | € ' 000 | per share (€) | |
| EPRA earnings | 40,402 | 2.01 | 42,733 | 2.15 |
| EPRA cost ratio (incl. direct vacancy costs) | 30.8% | 28.8% | ||
| EPRA cost ratio (excl. direct vacancy costs) | 29.1% | 27.8% | ||
| EPRA property related capital expenditure | 19,425 | 12,776 |
| 31 December 2023 | 31 December 2022 | |||
|---|---|---|---|---|
| € ' 000 | per share (€) | € ' 000 | per share (€) | |
| EPRA NRV | 819,913 | 40.68 | 987,844 | 49.26 |
| EPRA NTA | 711,460 | 35.30 | 885,774 | 44.17 |
| EPRA NDV | 733,561 | 36.40 | 918,162 | 45.78 |
| EPRA LTV | 34.4% | 29.3% | ||
| EPRA net initial yield (NIY) | 5.3% | 4.6% | ||
| EPRA topped-up net initial yield | 5.8% | 5.0% | ||
| EPRA vacancy rate | 5.2% | 6.2% |
| 2023 | 2022 | |
|---|---|---|
| Gross rental income | 71,199 | 71,309 |
| Service costs not recharged | -1,926 | -1,322 |
| Operating costs | -10,852 | -10,663 |
| Net rental income | 58,421 | 59,325 |
| Administrative costs | -9,120 | -8,566 |
| Net financing result | -8,349 | -8,024 |
| Direct investment result before tax | 40,953 | 42,735 |
| Corporate income tax | -550 | -2 |
| Direct investment result / EPRA earnings | 40,402 | 42,733 |
| Direct investment result / EPRA earnings per share | 2.01 | 2.15 |
| 2023 | 2022 | |
|---|---|---|
| Administrative costs | 9,120 | 8,566 |
| Service costs not recharged | 1,926 | 1,322 |
| Operating costs (adjusted for municipality taxes) | 10,852 | 10,663 |
| Leasehold | 0 | -3 |
| EPRA costs (including direct vacancy costs) | 21,898 | 20,548 |
| Direct vacancy costs | -1,187 | -753 |
| EPRA costs (excluding direct vacancy costs) | 20,711 | 19,795 |
| Gross rental income | 71,199 | 71,309 |
| EPRA gross rental income | 71,199 | 71,309 |
| EPRA cost ratio (incl. direct vacancy costs) | 30.8% | 28.8% |
| EPRA cost ratio (excl. direct vacancy costs) | 29.1% | 27.8% |
| EPRA capital expenditure | 19,425 | 12,776 |
|---|---|---|
| Other | 715 | 0 |
| Like-for-like portfolio | 13,244 | 5,648 |
| Development | 5,466 | 7,233 |
| Acquisitions | -104 | |
| 2023 | 2022 |
| 31 December 2023 | 31 December 2022 | |||||
|---|---|---|---|---|---|---|
| EPRA NRV | EPRA NTA | EPRA NDV | EPRA NRV | EPRA NTA | EPRA NDV | |
| IFRS Equity attributable to shareholders | 709,882 | 709,882 | 709,882 | 887,008 | 887,008 | 887,008 |
| Hybrid instruments | ||||||
| Diluted NAV | 709,882 | 709,882 | 709,882 | 887,008 | 887,008 | 887,008 |
| Diluted NAV at fair value | 709,882 | 709,882 | 709,882 | 887,008 | 887,008 | 887,008 |
| Deferred tax in relation to fair value gains of | 2 | 2 | ||||
| investment property Fair value of financial instruments |
1,608 | 1,608 | -1,163 | -1,163 | ||
| Intangibles as per IFRS balance sheet | -32 | -32 | -72 | -72 | ||
| Fair value of fixed interest rate debt Real estate transfer tax |
108,422 | 23,711 | 101,999 | 31,225 | ||
| NAV | 819,913 | 711,460 | 733,561 | 987,844 | 885,774 | 918,162 |
| Fully diluted number of shares | 20,155,221 | 20,155,221 | 20,155,221 | 20,054,241 | 20,054,241 | 20,054,241 |
| NAV per share | 40.68 | 35.30 | 36.40 | 49.26 | 44.17 | 45.78 |
| 31 December 2023 | 31 December 2022 | |
|---|---|---|
| Investment property including assets held for sale | 1,037,215 | 1,274,988 |
| Developments | -53,730 | -58,878 |
| Property investments | 983,485 | 1,216,110 |
| Allowance for estimated purchasers' costs | 110,101 | 109,450 |
| Gross up completed property portfolio valuation | 1,093,586 | 1,325,560 |
| Annualised cash passing rental income | 71,835 | 72,852 |
| Annualised property outgoings | -13,725 | -11,951 |
| Annualised net rent | 58,110 | 60,901 |
| Notional rent expiration of rent free periods or other lease incentives | 5,661 | 5,940 |
| Topped-up annualised net rent | 63,771 | 66,841 |
| EPRA net initial yield | 5.3% | 4.6% |
| EPRA topped-up net initial yield | 5.8% | 5.0% |
| 31 December 2023 | 31 December 2022 | |
|---|---|---|
| Estimated rental value of vacant space | 4,320 | 5,510 |
| Estimated rental value of the whole portfolio | 83,516 | 88,317 |
| EPRA vacancy | 5.2% | 6.2% |
The total annual contracted rent divided by the total leased square meters.
The percentage of assets within the portfolio that have formally obtained sustainability certification, ratings or labelling valid at the end of the reporting period.
NSI reports on the following certificates:
EPRA costs include all administrative costs, net service costs and operating expenses as reported under IFRS, but do not include ground rent costs. These costs are reflected including and excluding direct vacancy costs. The EPRA cost ratio is calculated as a percentage of gross rental income less ground rent costs.
NSI qualifies as a Dutch Real Estate Investment Trust (fiscale beleggingsinstelling or FBI) and as such is charged a corporate income tax rate of 0% on its earnings. The tax regime stipulates certain conditions, such as a maximum ratio of 60% between debt and the book value of real estate, maximum ownership of shares by one legal entity or natural persons, and the obligation to pay out the annual profit by way of dividends within eight months after the end of the financial year.
Before 2014, activities permitted under FBI legislation were limited to portfolio investments activities only. Effective 1 January 2014, new legislation that allows FBI's to perform enterprise-type business activities within certain limits. These activities must be carried out by a taxable subsidiary and must support the operation of the FBI's real estate business.
EPRA earnings is a measure of operational performance and represents the net income generated from operational activities. It excludes all components not relevant to the underlying net income performance of the portfolio.
Indicator for the profitability of NSI; portion of the EPRA earnings attributable to shareholders allocated to the weighted average number of ordinary shares.
The total energy used by renewable and non-renewable resources during a reporting period, normalised by the sum of the CRREM floor area in square meters (gross floor area minus parking garages and outer façade) for the properties in scope.
Energy Performance Certificates (EPCs) tell you how energy efficient a building is and give it a rating from A (very efficient) to G (inefficient)
Association of Europe's leading property companies, investors and consultants which strives to establish best practices in accounting, reporting and corporate governance and to provide high-quality information to investors.
The estimated amount at which a property or space within a property, would be let under the market conditions prevailing on the date of valuation.
G4 refers to the locations Amsterdam, Den Haag, Rotterdam, and Utrecht.
The GRESB Score is an overall measure of ESG performance – represented as a percentage (100 percent maximum). The GRESB Score gives quantitative insight into the company's ESG performance in absolute terms, over time and against your peers.
HNK stands for 'Het Nieuwe Kantoor', (which means 'The New Office'). HNK is NSI's flexible office concept and offers an inspiring environment with stylish workplaces, office spaces, meeting areas, catering facilities and various ancillary services. HNK offers different propositions, including memberships (flexible workstations), managed offices (fully equipped offices), bespoke offices and meeting rooms.
Debt ratio and profitability ratio used to determine how easily a company can pay interest on outstanding debt. The interest coverage ratio is calculated by dividing net rental income during a given period by net financing expenses during the same period adjusted for capitalised interest.
The direct result reflects the recurring income arising from core operational activities. The direct result consists of gross rental income minus operating costs, service costs not recharged to tenants, administrative costs, direct financing costs, corporate income tax on the direct result, and the direct investment result attributable to non-controlling interests.
The indirect result reflects all income and expenses not arising from day-today operations. The indirect result consists of revaluations of property, net result on sales of investment, indirect financing costs (movement in market value of derivatives and exchange rate differences, corporate income tax on the indirect result, and the indirect investment result attributable to non-controlling interests.
The total result reflects all income and expenses; it is the total of the direct and the indirect investment result.
Adjustments in rent granted to a tenant or a contribution to tenants' expenses in order to secure a lease. The impact of lease incentives on net rental income is straight line over the firm duration of the lease contract under IFRS.
Like-for-like growth figures aim at assessing the organic growth of NSI. In the case of like-for-like rental income the aim is to compare the rental income of all or part of the standing portfolio over a certain period with the rental income for the same portfolio over a previous period (i.e. year-onyear and/or quarter-on-quarter). In order to calculate like-forlike growth, the nominal increase in rent is adjusted for the impact of acquisitions, divestments and properties transferred to and from the development portfolio and between segments (e.g. office to HNK).
The LTV-ratio reflects the balance sheet value of interest-bearing debts plus short term debts to credit institutions, net of cash and cash equivalents, expressed as a percentage of the total real estate investments, including assets held for sale.
The estimated amount for which a property should change hands on the date of valuation between a willing buyer and a willing seller in an arm's length transaction after proper marketing wherein each party had acted knowledgeably, prudently, and without compulsion. The market value does not include transaction costs.
The net asset value represents the total assets minus total liabilities. At NSI this equates to the shareholders' equity (excluding non-controlling interests as stated in the balance sheet). The NAV is often expressed on a per share basis; in this calculation the number of shares outstanding at reporting date is used rather than the average number of shares is used.
The EPRA NAV metrics make adjustments to the NAV as per the IFRS financial statements to provide the most relevant information on the fair value of the assets and liabilities, under different scenario's.
The net margin measures operating efficiency; it indicates how effective NSI is in managing its expense base. It is calculated as net rental income as a percentage of gross rental income.
The net result on sales of investment property reflects the disposal price paid by a third party for a property minus the value at which the respective property was recorded in the accounts at the moment of sale, net of sales costs made. The sales costs include costs of real estate agents and legal costs, but can also include internal costs made which are directly related to transaction.
The effective rent reflects the contractual annual rent after straightlining of rent free periods and rental discounts.
Gross rental income reflects the rental income from let properties, after taking into account the net effects of straight lining for lease incentives and key money, including turnover rent and other rental income (e.g. specialty leasing and parking income).
Gross rental income net of (net) costs directly attributable to the operation of the property (non-recoverable service charges and operating costs). Income and costs linked to the ownership structure, such as administrative expenses, are not included.
The estimated annualised cash rental income as at reporting date, excluding the net effects of straight-lining of lease incentives. Vacant units and units that are in a rent-free period at the reporting date are deemed to have no passing cash rent.
This ratio compares the minimum guaranteed rent and the turnover rent to the estimated rental value and as such indicates whether a unit or property is underlet or over-rented.
The reversionary rate measures the rental gain/loss of a deal as the difference between the new rent (after the deal) and the old rent (before the deal).
Standing portfolio is used in like-for-like calculations and concerns the real estate investments at a specific date that have been consistently in operation as part of NSI's portfolio during two comparable periods. Note that an investment property can be considered both standing and at the same time non standing, depending on the comparison periods used (e.g. year-on-year and quarter-on-quarter).
Vacancy rate (EPRA): reflects the loss of rental income against ERV as a percentage of ERV of the total operational portfolio.
This ratio is used as an indicator of the average length of leases in portfolios. It can be calculated over the full lease term of the contracts either up to expiration date or up to break option date.
Yield can generally be defined as the income or profit generated by an investment expressed as a percentage of its costs or the total capital invested.
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