LAMDA Development S.A. (LAMDA) Earnings Call Transcript

Ladies and gentlemen, thank you for standing by. I am Gellie, Chorus Call operator. Welcome, and thank you for joining the LAMDA development conference call and live webcast to present and discuss the first quarter 2026 financial results. [Operator Instructions] The conference is being recorded. [Operator Instructions] Please note that the presentation and slides are in manual format. Each participant can access and view individual slides as they wish. At this time, I would like to turn the conference over to Mr. Apostolos Zafolias, Chief Strategy and IR. Mr. Zafolias, you may now proceed.

Thank you. Good evening, ladies and gentlemen, and thank you for joining us today as we discuss our financial results for the first quarter of 2026. The first quarter marked a strong start to the year, reflecting solid momentum across all core business segments. Our shopping destinations and Pesos Marina delivered record performance, while construction on a Ellinikon continue to advance at pace with major developments progressing well into their execution phase. As a matter of fact, the delivery of the first projects will be kickstarted this year with the Ellinikon sports park, which will open its doors to the public gradually beginning in July of this year. After having already successfully hosted the super special stage of the 2026 [indiscernible] a couple of weeks ago. The next project to open their doors to the public next year are going to be their [indiscernible] the renovated Ausco Mas Marina, while a number of our residential developments, both in the coastal front as well as little assets are progressing towards our delivery stage will estimate a completion date starting in Q1 of 2027 and continuing through the end of the year. The acceleration of construction activity across the development as reflected in the CapEx recorded during the first quarter has also had an impact on our financial performance. Specifically, infrastructure-related expenditures have increased operating expenses in the near term. However, the investments are fundamental to advancing the project from the design and sales phases into delivery, supporting the creation of a well-planned integrated development. This applies across all key components of the development, including residential neighborhood, sports facilities and the Metropolitan Park. We remain committed to delivering the diverse portfolio of development within the Ellinikon and creating sustainable long-term value for our shareholders with a renewed focus on execution and cost efficiency. We're also focusing on the optimization of our capital structure. We already issued EUR 500 million worth of bonds in November and another EUR 350 million worth of bonds in June, having high investor demand and at the favorable terms. By doing so, we pushed the bond expirations by 7 years, maintaining favorable cost, cost of debt in a period of rising rates. Now going on to the segments more specifically, in the mall segment. We delivered another quarter of record performance. Profitability continued to improve year-over-year, primarily driven by the higher rental income and increased marketing revenues. And all of this is supported by very strong KPIs across the board, resilient footfall and new all-time high in tenant sales. These results once again demonstrate the strength of our retail platform and its ability to generate sustainable earnings and strong recurring cash flows over time. On the Marina front, [indiscernible] Marina delivered another quarter of record performance, reflecting sustained strong demand in the premium yarding market and continued growth across its revenue streams. At the same time, we are investing in the next phase of growth, both in [indiscernible] in Corfu in [indiscernible] through a comprehensive redevelopment of the Marina, which together with the adjacent Riviera and Gallaria is expected to become a significant driver of future revenue growth for the group upon completion next year. At the Ellinikon now, the first quarter marked a strong period of execution. Revenues increased by 55% year-over-year, reflecting the continuous progress of residential development as construction advanced across the whole project. Development and construction has accelerated across both residential as well as infrastructure works, supporting the successful delivery of our long-term master plan. At the same time, commercial momentum has remained strong. As of the end of May of 2026, cumulative cash proceeds from property sales and leases, have surpassed $1.7 billion and continuing to grow. Momentum continued in June with almost 90% of the 671 units that we've launched within the Little Latin neighborhood, sold to the reserve. Now on the construction front, River Tower reached the 50th floor a timing in pool 200-meter high. The earlier 44th floor construction milestone, which was concluded in March has resulted in the full collection of a EUR 60 million contractual payment, further supporting cash flow generation. The positive progress on the construction front is also evident in our results and reinforce our expectation of exceeding a EUR 1.6 billion of cumulative CapEx through the end of this year. I will now hand the call over to Harris Goritsas, our Group CFO, who will talk you through the key highlights of the group's financial results in more detail.

Thank you, Apostolos, and good evening to everyone from my side as well. I will take you through our financial results for the first quarter of 2026, referring to selected slides on the presentation that is available on our website. I will begin with an overview of the group's key highlights, and then I will provide a more detailed review of the performance of our 3 core business segments, namely malls, Marinas and the Ellinikon. Starting at group level, total revenues reached EUR 143 million in the first quarter of '26, up 35% year-on-year driven primarily by higher revenue recognition from residential developments at the Ellinikon, reflecting the increased pace of our construction works as well as the continued strong operating performance of our recurring income generating [indiscernible] Marina assets. Important to note that group EBITDA before income grows by 3%, whereas Ellinikon EBITDA is hit by the acceleration of Infra works. We will talk more in details on the section about Ellinikon model that one. Details of the EBITDA and the net results breakdown can be shown on Slides 8 to 10 of the presentation. The value of group's total investment portfolio surpassed EUR 3.8 billion as of 31st of March '26, driven by all assets in our portfolio reflecting continuing value creation. Furthermore, total group cash remained at a strong level, accounting to EUR 831 million as of end March '26 and to note, in early June '26, we successfully completed rations and leasing of a EUR 300 million bond combined with the early repayment of the group's bond issued back in 2020, which is planned for execution on the 21st of July of this month, the transaction further optimizes our funding profile extends our debt maturities and reaffirms our continuing access to the capital markets, analyzing each of our business segments now, I will start with the LAMDA malls and our 4 operating more EBITDA, which reached EUR 22.7 million in quarter 1 2026. Operating malls EBITDA adjusted for the EUR 2.2 million of into group recharges was EUR 24.9 million or 5% higher year-on-year. This strong result was primarily driven by the 5% increase on the base rents and the 8% increase in parking revenues for the same period. This performance was supported by a 5% increase in footfall versus same period last year and a new all-time high in tenant sales, which reached EUR 187 million in quarter 1. With respect to the commercial leasing progress of our 2 retail endemic destinations of Ellinikon, which are currently under development. Head of terms that have been signed with tenants represent 70% of the GLA at the Ellinikon mall and 76% at Riviera Galeria. With strong momentum highlights the solid fundamentals of the Greek retail market and the continued interest from leading international brands in our landmark developments. Concrete works at Riviera Galeria have been completed with electromechanical installations and partitioning works progressing well. At the Ellinikon Mall, construction works commenced a few weeks ago in June by Terna. As of March 31, 2026, the total gross asset value of LAMDA Malls Group reached EUR 1.8 billion with the value of the 4 operating malls reaching a new record high of EUR 1.4 billion. For a detailed analysis of LAMDA Malls financial results, please refer to Slides 14 to 18 of the results presentation. Moving now to our Marinas business unit. [indiscernible] Marina continued its strong growth trajectory, achieving a new record performance in the first quarter of 2026. Total revenue reached EUR 6.3 million, while EBITDA grew by 12% year-on-year to EUR 4.5 million. Performance was primarily supported by revenue from York transits as well as annual contractual fees uplift. While [indiscernible] Marina continues to deliver strong operating performance, the group is also investing in its next phase of growth. through the comprehensive redevelopment of IS Cosma Marina. A phased reduction in available PEF is currently taking place as part of an extensive redevelopment program designed to significantly upgrade infrastructure and services while reconfiguring the layout to accommodate larger vessels. Upon completion, in mid-2027, Cosma Marina is expected to serve as a key driver of incremental revenue growth for the business unit and of course, for the group. Details on Marina's performance are available on Slide 19. Let me now turn to our land bank and [indiscernible] project and highlight some of its key achievements during the period. Commercial demand for the [indiscernible] neighborhood remained strong. As of the end of June '26, 590 out of the 671 units launched have been sold or reserved representing an absorption rate of 88%. This reflects a sustained customer demand and reinforces the attractiveness of the Ellinikon residential offering. Revenue from residential developments reached EUR 87 million in Q1 '26, representing a 33% increase compared with Q1 '25 driven by ongoing construction progress and the relevant recognition of revenue under accounting standards. In addition, during the first quarter of '26, we recognized a further $14 million of revenue from property sales, primarily relating to office spaces. As a result of projects continuing commercial success, cumulative cash proceeds from reversional sales and long-term lease agreements have exceeded the EUR 1.7 billion milestone from the launch of the Ellinikon back in mid-'21 and until end of May '26. The [indiscernible] and Ellinikon cash collections are available on Slide 21. Construction progress has accelerated, registering an increase of EUR 126 million during Q1 '26 bringing the total CapEx for buildings and infrastructure works from the start of the project and until March '26, over EUR 1.1 billion. At this point, I want to emphasize a short-term P&L hit from this construction progress. As infrastructure activity ramps up, the associated nonrecovery VAT is registered in our operating results following relevant accounting rules. Consequently, the increase in [indiscernible] operating expenses as depicted on Slide 24 of the presentation is a function of higher investment activity rather than a higher underlying operating costs. To give you the magnitude, 51% of our reporting operating expenses under Ellinikon quarter 1 '26 represent nonrecoverable VAT. This is more than 3x higher than same period last year, indicating the significant acceleration of construction works we have talked about. Finally, total CapEx deployment remains on track based on our current construction schedule, we remain confident in achieving our full year '26 CapEx target of approximately $1.6 million. Further details are shown on Slides 23 and 26. And with that, we conclude the key highlights of our first quarter '26 financial results and we will now be happy to answer your questions.

[Operator Instructions] The first question is from the line of [indiscernible] with EuroBank Equities.

[indiscernible]

I'm sorry to interrupt you. This is the operator. Can you we cannot hear you very well. Can you please speak a little closer to your microphone?

You hear any better now -- is this better?

A little better but the sound is not as it should be, so management can hear you. Are you speaking from a speaker phone?

Yes. And speaking from the somewhere time.

Could you use your handset, please.

There is no handset in my laptop.

Okay. I will try to turn your volume up a little bit.

I was wondering if you could give us a [indiscernible] the last thing that we just mentioned on the infrastructure CapEx and how this is coming into our OpEx, when do we think this will be completed when would this be so we can have an understanding on how it will be grown enough cost going ahead?

I think you asked about the impact that we have in OpEx from the ongoing CapEx from interest works. [Foreign Language] Let me take and try to clarify what we just previously commented, typically, the infrastructure along with, of course, the residential project CapEx EEE is capitalized. So it does not hit the P&L. What is the specific any for a Ellinikon project in Infra? Infrastructure is not a direct allocated cost. So we treat based as an indirect cost that is allocated to the projects. And because of that IFRS treatment, the follows the pro rata rule. So almost 90% of the VAT of infrastructure cannot be recovered thus has to be expensed. That means it hits the P&L. Last year same quarter, we had EUR 3 million of nonrecoverable VAT. This year, because of the acceleration, we have EUR 12 million nonrecoverable VAT. This is 3 -- more than 3x that I was referring to my speech. This EUR 8 million incremental keeps the quarter's profitability via the OpEx line. Now this is past. This is current and past performance. What do we project? We project infrastructure to remain on an accelerated basis. It won't have ups and downs. I cannot come it will be EUR 12 million for every quarter, but it will be in the same bulk a little bit more, a little bit less, it depends on the quarter of execution. How long the main infrastructure works are planned to finish by mid of next year to end of next year, where we plan to also deliver the first residential projects to the inhabitants. So one could say that for the next, I would say, 18 to 24 months, this trend will continue.

Okay. Great. That was very good. I also have 1 question on a little bit mall. Have you drawn any lines? Have you signed any launch on the limit CapEx construction has started? Or is this something that we should expect coming ahead?

Okay. No, because the line is very -- it's not good. Let me repeat the question. Your question was about Ellinikon malls and if we have drawn down any of our signed loans, correct?

Correct.

Now, of course, we have -- I mean, first of all, under the incomes have 2 malls that via Galleria and the Ellinikon Mall, which is ontime big one. Regalia, as we said, it's progressing very, very well. We consider we will be finished with the construction end of this year, beginning of next year. So of course, we have drawn down lines. And I would say we are at 50% of the drawdown, and we expect the rest to happen throughout the course of the remaining months. For the Ellinikon Mall, as I said, construction has started a few weeks ago. we have not drawn down yet any line. We are about to sign the final agreement. Now we have finalized the details with the banks within half 2 of 2026 and currently, all the expenses are happening from our own cash.

Might I asked also if Peter, remind us which there are certain milestones and incompetent important when we should expect another milestone.

I'll take that. Look, I think that the first milestone line is the opening of the sports complex which, as I mentioned already kind of had a preopening, if you wish, by hosting the Rally properties in June and is expected to start to open in stores and start operating starting gradually from July of this year, this month essentially onwards through the end of the year. Beyond that, I think the next projects coming online or Riviera Galleria and the [indiscernible] the plan is to sort of have them ready at the same time. As Harris mentioned, expectation of completion of construction is towards the end of the year and beginning of next -- and then opening is still sort of in discussion with the retailers, probably second half of next year of 2027 with exact dates obviously to follow. And beyond that, I think on the residential front, you have ever tower along with copresidents and a bunch of developments in the Latin neighborhood that are starting to complete their construction end of this year, beginning of next, and deliveries are going to take place in 2027. So I think those are the main milestones, if you wish.

Next question is from the line of Jakub Caithaml from Wood & Co.

Three from my side, also one by one, if I may. I hope you can hear me all. First, on the resi sales, I think that over the last 12 months, you sold roughly 100, 110 apartments which brings the little sense to almost 600 apartments sold overall. Then there is the River Tower and the Golf residences, which would bring the total to even higher, I think potentially 800 to 900 sold and I wanted to just confirm, I think originally, we were thinking about like 1,300, 1,400 apartments for the first phase. I think that now the figure may be a little bit higher, which would mean that we are approaching 2/3 of the apartment sold. Is this broadly the right way to think about this? And also in the context of the coming completions, which are getting closer. Should we expect that this annual pace of sales will be picking up now? And how are you thinking about sort of the share of apartments that you would like to have sold by the time these individual projects are being completed? And how much of these apartments roughly do you think would be optimal to sort of delay and maybe sell hopefully for a higher price only once those projects and individual parts over the first phase are spending.

Okay. Yes, let me -- I'm going to try to remember all of them. But to start with, I think that you were asking about the total number of units that are going to be launched and sold. As of now, 315 units have been launched and sold at 100% in the coastal front, plus another 670 let's round up to 700 for argument's sake of little assets. Of those 670, about 90% of those have been sold and there's another small piece remaining to be sold. So round about numbers, you're talking about 1,000 right there. Through the end of this year, beginning now, actually, we're going to launch another 300 to 350. So 120, I believe, are being launched last month, and the remaining 200 and something are going to be launched through the end of the year. So that will give you sort of reconcile you to the total 1,300 unit number that you were referring to. Is that clear, and then I'll move to the next.

Got you. And this would be it for the first phase. So the total for the first place, we're looking at something like 1,300, 1,400?