CLS (LON:CLI) outlined progress on leasing, disposals, and refinancing during its full-year 2025 results presentation, while noting that earnings declined amid a smaller portfolio and higher vacancy. Chief Executive Fredrik Widlund, joined by new CFO Harry Stokes, said the company remains focused on reducing vacancy, lowering leverage toward its targeted loan-to-value (LTV) range, and selectively investing in the portfolio under a stricter capital allocation approach.
Leasing activity hits seven-year high, though vacancy rose
Management said the top operational priority is increasing lettings to reduce voids and improve earnings. CLS signed £70 million of leases during the year and secured £17 million of annual rent, which it described as the highest level in seven years, with momentum stronger in the second half (£9.5 million versus £7.5 million in the first half).
Despite leasing progress, reported vacancy increased to 14.5%. Widlund said the rise reflected planned expiries and two unforeseen tenant insolvencies in Germany, along with expiries and newly completed refurbished space in France. CLS said it expects vacancy to start reducing as activity improves, new supply remains limited, and there are fewer expiries in 2026.
Earnings and NTA decline, dividend maintained
Stokes reported EPRA earnings per share of 7.6 pence, down 17% year over year, citing the impact of disposals and the absence of a one-off forfeited deposit received in the prior year. EPRA net tangible assets (NTA) fell 7% to 200.7 pence, driven mainly by a small decline in portfolio value, partly offset by the strengthening euro.
The company proposed a final dividend of 2.7 pence per share, unchanged from the prior year’s final dividend, bringing the total dividend for the year to 4.0 pence. CLS said the dividend was covered 1.9 times by EPRA earnings, in line with its policy coverage range of 1.5 to 3.0 times. Management also highlighted an optional enhanced scrip dividend alternative, offered at a 5% discount to the reference share price, aimed at retaining capital in the business.
On the income statement, CLS said net rental income fell, partly offset by a 6% reduction in administrative and property operating expenses and a 10% reduction in finance costs. Stokes said the cost reductions reflected measures taken last year and the impact of disposals, while finance costs benefited from debt paydown. The average cost of debt remained stable at 3.8%.
Disposals and leverage: progress, but LTV remains above target
One of CLS’s stated strategic priorities is executing property sales to reduce LTV into its 35% to 45% target range. The company completed £144 million of sales in 2025, following £66 million in 2024. Management said the largest disposal was a student building in Vauxhall and that the company also sold two properties in Germany and one in France. On average, properties sold at 2.3% below pre-sale valuations.
Net debt fell by just under £90 million (Stokes cited £86 million after currency impacts), but LTV remained “stubbornly high” at 50% due to valuation declines. Widlund said that on a like-for-like basis, LTV would have reduced to approximately 46.5%.
Looking ahead, CLS expects to dispose of £100 million to £150 million of property in 2026, excluding Spring Gardens, which management expects to complete “early next year,” while later noting an estimated completion “early 2027” for the conditional sale. The company also said it was under offer on three properties for £80 million.
In the Q&A, management said it did not expect further price reductions on those advanced sales, though it acknowledged the market remains fluid and referenced uncertainty tied to the situation in the Middle East.
Refinancing completed for 2025 maturities; 2026 pipeline underway
CLS said it addressed a peak refinancing year in 2025, with approximately £373 million to about £400 million of loans needing attention. Management reported that all 2025 maturities were refinanced or repaid, with no change to the average cost of funds (3.8%). The company said this smoothed its maturity profile, leaving no more than around £200 million needing refinancing in any single year going forward.
For 2026, CLS said it has just under £200 million of refinancing to complete (elsewhere described as circa £185 million), including about £145 million of secured loans and £42 million of credit facilities. Stokes said the company has completed £39 million so far, including extending one credit facility by a year, and is in discussions with lenders on the remaining amount.
Valuations, asset management, and redevelopment pipeline
CLS reported a like-for-like valuation decline of 3.8% for the portfolio, an improvement from a 5.8% decline the prior year. Stokes said the move reflected a small increase in yields and stable rental values. In the UK, the portfolio fell 4.6%, but management said roughly two-thirds of that decline related to a change in valuation basis at Spring Gardens. Excluding Spring Gardens, the UK portfolio fell 1.6%.
Management highlighted property-specific movements, including Gothic House in Dortmund, which increased in value by almost 50% after signing an eight-year lease with the German tax authority, and Maximilian Forum in Munich, which fell about 15% following a tenant insolvency previously disclosed.
Widlund described CLS’s operating model as heavily focused on active asset management, with teams organized into clusters across the UK, Germany, and France. He also said the company is exploring alternative uses across the portfolio, including residential, serviced apartments, hotels, and life science. Examples discussed included:
- Columbia Centre in Bracknell, where a Permitted Development Right was recently approved.
- New Printing House Square in central London, where leases have been aligned for expiry in 2029 and the company expects to submit a pre-application later this year for a residential-led conversion.
- Bismarckstraße in Berlin, where CLS is evaluating a hotel conversion and is working with a hotel operator on a potential pre-let.
- Maximilian Forum (Martinsried outside Munich), where space is being converted to CoLabs and ancillary space for tenants.
On sustainability, CLS said it is upgrading gas boilers to heat pumps and installing smart water meters, and it remains confident it can meet expected UK EPC regulatory requirements for 2027 and 2030. Management said 84% of the UK portfolio is already rated EPC A to C.
In response to an analyst question about leverage metrics, management said it has not set a target for net debt to EBITDA, which was cited as 12.4 times, but stated it would like the ratio to be lower.
Management reiterated that near-term earnings will be pressured by disposals, lease expiries, and vacancy, but said the actions being taken to refocus the portfolio and strengthen the balance sheet are intended to leave CLS “fitter” over the medium and long term.
About CLS (LON:CLI)
We are a commercial property investment company with a £2.1bn portfolio listed on the Premium Main Market on the London Stock Exchange, specialising in future-focused office space in the UK, Germany and France. Through geographical diversification, local expertise and an active management approach, we transform office properties into sustainable, modern spaces that help our tenants’ businesses to grow.
