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Annual Report 2019
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Interview
Finance

“All profits are reinvested in the company”

“Ghelamco’s higher profit margin and increased growth result from vertical integration,” says CFO Philippe Pannier.

What makes Ghelamco a financially healthy company?

“Firstly, ever since Ghelamco was founded, all profits have been systematically reinvested in the company. Secondly, our land portfolio ensures we can maintain our growth for seven to ten years, whatever might happen.”

“That long-term security allows us to stress certain aspects or move others to the back burner, dependent on market conditions. We can be flexible about what type of land we utilize when. Other players have to develop what they’ve got in their portfolio, even if the market isn’t quite right for it.”

What does Ghelamco’s financial model look like?

“Actually we have two models: one for residential real estate and one for offices. As regards residential properties, we develop, build and sell them straightaway to occupants or investors. As for offices,  we either lease out or put up for sale as investment properties for institutional investors and real estate funds.”

“Investors get a higher return on a safer investment.”

Philippe Pannier CFO Ghelamco

“The profits are systematically reinvested in the land portfolio. That way, we can always maintain that 7-to-10-year outlook — offering security to our bond holders. Those long-term prospects make us the exception in the sector. Other players often have a much shorter time horizon and a smaller land portfolio.”

What is Ghelamco’s main growth driver?

“We keep a close watch on four parameters in the annual accounts: the balance-sheet total, equity capital growth, solvency and the free cash flow we generate every year. The past ten years, that free cash flow amounted to an average of 100 million euros a year. This is the company’s growth driver: that money stays in the company to support the growing project portfolio.”

How important is scale for Ghelamco?

Ghelamco systematically records higher profits than industry peers. Our scale is just one of the reasons why. We work across borders, with Belgium and Poland as our main markets. During important price negotiations for building materials or services, we can put our scale to good use. That decreases our investment costs, leading to higher profit margins.”

“Through bundling our in-house know-how, we create value.”

Philippe Pannier CFO Ghelamco

Besides scale, what else boosts your profit margin?

“Our higher profit margin stems from our vertical integration. The development process of a building — from investing in land, design, financing and leasing, to the ultimate sale — is managed, controlled and optimized completely in-house.”

What can bond holders expect?

“A solid return on a virtually no-risk investment in a green, sustainable company. Real estate is a safe bet in any event. And our diversified portfolio is even safer than individual properties. The return on those is about 3 percent. We do better. Investors get a higher return on a safer investment.”

Will Ghelamco be issuing green bonds this year?

“Green bonds are the only ones we issue. They’re more attractive to investors and contribute to the sustainability objectives set by the United Nations. While they don’t provide investors with a higher interest rate, they do guarantee that the money will only be used for sustainable real estate projects.”

“We now have an approved Euro Medium Term Note Programme which allows us to issue 250 million euros (in tranches) in Green Bonds in 2020. Those bonds are listed on the Luxembourg Green Exchange, a specialized platform for green bonds. Later this year we will be announcing new issues under this programme.

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