COVIVIO (EPA:COV) - Covivio - Activity at end-March 2021: encouraging perspectives

Transparency directive : regulatory news

20/04/2021 17:45

Paris, 20 April 2021, 5:45 pm

             Activity at end-March 2021: encouraging perspectives

Letting activity: positive signals
* Europe Offices: 64,000 m2 of new leases signed or existing leases renewed
* Germany Residential: Mietendeckel rent cap legislation deemed
  unconstitutional in Berlin; well oriented  activity
* Hotels: recovery expected in the second half after a first quarter impacted
  by restrictions

Intensification of the prime strategy on offices
* Adaptation of the development pipeline with a focus on city centres: 2021
  deliveries already 82% pre-let and launch of a flagship mixed-use project in
  Berlin-Alexanderplatz
* Acceleration of the conversion of offices into housing: five new projects in
  France for a total of 92,000 m2 and EUR220 million
* Continued rotation: EUR500 million in cash sales and preliminary agreements
  signed in Q1 2021
* Covivio rolls out its "All in One" offering and delivers a 4,400 m2
  development in Paris Gobelins 100% let

Revenues at end-March 2021: stable on a like-for-like basis, excluding Hotels
* Offices: -1.2% on a like-for-like basis
* Residential: +3.4%, and +3.9% outside of Berlin
* Hotels: -46% on a like-for-like basis, impacted by the ongoing restrictions
  and an unfavourable basis for comparison in 2020
* 95% occupancy rate and 7-year firm average maturity of leases

Ahead of target to reduce carbon impact by 34% by 2030
* An ambitious target covering the period between 2010 and 2030 across a wider
  scope (Scopes 1, 2 and 3), including construction
* At end-2020, the carbon impact had been reduced by 20%, ahead of target

Organisational changes and appointments within Covivio management
* Tugdual Millet, Covivio's current Chief Financial Officer, has been appointed
  CEO of Covivio Hotels, supported by Elsa Tobelem, Deputy CEO
* This change in the organisation follows the departure of Dominique Ozanne,
  who has decided to pursue new professional goals
* Paul Arkwright, currently Director of Financial Control, Corporate Finance
  and Investor Relations, will become Group Chief Financial Officer.

                            ACTIVITY AT END-MARCH 2021

A diversified and secure model

With a EUR25.7bn portfolio (EUR17.1bn Group share) of assets in Europe, Covivio
has built its development on diversifying into sectors where it is a leading
player:

- 60% of the portfolio comprises offices in France, Italy and Germany, mainly
  in central locations in Paris, Milan and Berlin;

- Germany Residential accounts for 25% of the portfolio. It is located in
  central Berlin, Dresden, Leipzig and Hamburg, and in the dynamic cities of
  North Rhine-Westphalia;

- Hotel real estate (15% of the portfolio), located in major European tourist
  destinations (Paris, Berlin, Rome, Madrid, Barcelona, London, etc.), is let
  or managed directly by major operators such as AccorInvest, IHG, B&B and NH
  Hotels.

This portfolio is managed according to three strategic pillars:

1. Focusing on locations in the heart of major European cities, such as Paris,
   Berlin and Milan. As a result, 96% of the properties are within a
   five-minute walk of public transport.

2. Development, to deliver new buildings combining energy performance,
   well-being and adaptation to changing trends. Covivio is developing
   EUR1.2bn in offices (Group share) and EUR200m in housing in Europe
  (at 2020 year-end).

3. Customer culture with a user-centric strategy. Covivio supports its
   customers and tenants in their real estate strategies over the long term by
   forging strong partnerships (7-year firm average lease term). This is
   reflected in the ambitious service-led approach and increasing flexibility,
   particularly with the Wellio flex-office solution. The Group's occupancy
   rate stood at almost 95% at the end of March.

Positive signals on our markets

In offices, the rental market has been impacted by the ongoing restrictions,
with companies holding off on decision-making, particularly for large surfaces.
However, rental discussions have gathered pace and visits have increased since
early March, pointing to a more dynamic second half.

In Greater Paris, take-up totalled(1) 327,400 m2, similar to Q1 2020 (-4%
excluding Total's exceptional 130,000 m2 lease of The Link building). In the
investment market, with EUR3.6bn invested, volumes are significantly higher
than the 10-year average (+40%), confirming investor interest in this asset
class (-27% compared to Q1 2020, due to the delayed impact of the crisis).
Prices are also up 3% on average compared to 2020 year-end in Paris (+2%), the
Western Crescent (+7%) and the Inner Rim (+5%).

Take-up was also fairly resilient in the six major German cities(2) (-3%
year-on-year, at 653,500 m2). Berlin, Hamburg and Frankfurt even saw increases
of 19%, 34% and 7% compared to Q1 2020. The vacancy rate remains low at an
average of 3.8%, of which 2.1% in Berlin, 3.5% in Hamburg and Munich and 6.5%
in Frankfurt and Düsseldorf.

In Milan(3), the first quarter was encouraging with take-up of 70,000 m2, in
line with Q1 2020 (excluding Saipem's exceptional 41,000 m2 lease in Santa
Giulia, in Milan Periphery).

(1) Sources: Immostat; Knight Frank
(2) Berlin, Düsseldorf, Frankfurt, Hamburg, Cologne, Munich; source: JLL
(3) Source: CBRE

In this context, Covivio has signed 64,000 m2 of new leases (23,000 m2) and
lease renewals (41,000 m2) in France, Italy and Germany. Tenants are
particularly interested in development projects. For example, Covivio is
supporting the growth of the Onepoint group, already a partner tenant at two
sites in Paris and Bordeaux, by signing an off-plan lease for 12 years firm on
9,067 m2 of a new development in Bordeaux (Jardin de l'Ars). By 2024, the
development will comprise 19,200 m2 of space, already 50% pre-let, in the
Euratlantique district close to Saint-Jean Station. On the Silex(2) tower in
Lyon's central business district (CBD), 1,150 m2 have been pre-let, bringing to
58% the occupancy of the building, which will be delivered in late June.
Lastly, with discussions now at an advanced stage, more properties are expected
to be pre-let in Paris and Milan over the coming weeks.

For its operating portfolio, Covivio has completed the letting of its Carré
Suffren building in Paris near the Eiffel Tower, with 2,800 m2 of new leases
signed following a plan to upgrade the common areas and catering facilities.
Milan is also seeing a strong positive trend. Several new leases for a total of
4,000 m2, including 2,100 m2 in the Garibaldi Towers, have been signed, with an
average rent increase of 22%. Lastly, activity has also picked up in Germany in
recent weeks, with 3,000 m2 let in the Zeughaus building in Hamburg.

Covivio has also come to an agreement with Eiffage to renew the campus leases
(33,270 m2) in Vélizy, now leased for 10 years firm until end-2030. For the
same rent level, Eiffage has thus committed to keeping its head office in this
district.

The Residential activity in Germany remains buoyant. On 15 April, the Federal
Court of Karlsruhe overturned Berlin's rent cap legislation (Mietendeckel),
which had a counterproductive impact on housing offer (-57.5% according to the
economic institute DIW). This will help revitalise the housing market in
Berlin. Covivio will come back to market rents as defined in the lease
contracts and will assess the situation of each tenant on a case-by- case basis
in case of hardship. The Group's other locations (North Rhine-Westphalia,
Hamburg, Dresden and Leipzig) are benefiting from a positive reversion
(increase in rents from 10% to 15% on average when reletting) and the capex
programmes implemented in recent years.

In Hotels, restrictions and lockdowns in Europe weighed on activity in the
first quarter, as expected. As a reminder, Q1 2020 benefited from two months of
strong business activity before the introduction of restrictions in March. At
the end of February 2021, RevPar in Europe was down 83.5%(4) compared with the
same period in 2019. France fared slightly better in this respect (-68%), owing
to looser restrictions in the first quarter and a larger proportion of domestic
customers.
In the second half, the acceleration of vaccination programmes in Europe and
announcements of plans to ease lockdowns, particularly in the United Kingdom,
with hotels and restaurants due to reopen in mid-May, suggest that the sector
is starting to recover. In this respect, the significant upturn in hotel
occupancy rates in China and the United States demonstrates the hotel sector's
capacity for rapid recovery, once the health crisis has been resolved.

In this context, Covivio can rely on a solid partner tenant base, with a hotel
rent collection rate of 88% (73% including differed rent payments).

(4) Source: MKG

Intensification of the prime strategy for offices

During the first quarter, Covivio doubled down on its prime strategy for
offices, seeking to bolster the centrality and quality of the portfolio,
focusing on:

1. Adapting the development pipeline with more CBD projects

As Covivio's second strategic pillar, the development pipeline is key to
transforming obsolete buildings into attractive workspaces tailored to new
customer demand, while generating significant financial and non-financial value
creation. Covivio is continually adapting its development pipeline to the new
market environment.

This year, Covivio will deliver eight projects, already pre-let at 82%, mainly
located in Paris, Montrouge, Lyon and Milan. Covivio has already delivered the
Flow building (23,600 m2) located in Montrouge and fully let to a subsidiary of
EDF for 9 years firm. A five-minute walk from Chatillon-Montrouge metro station
on Line 13, in 2025, it will also benefit from the arrival of the new Grand
Paris line (Line 15).

At the same time, more prime projects are being launched. With the commitment
of five projects in 2021, all located in the central business districts of
Paris (Anjou, Monceau and Madrid-St Lazare), Milan (Corso Italia) and Berlin
(Alexanderplatz), the pipeline at end-2021 will consist almost exclusively of
assets located in central Paris, Milan and Berlin, of which 70% in the CBDs
alone.

During the quarter, Berlin city council granted building permit for a flagship
59,600 m2 mixed-use project located in the heart of the CBD. With its ideal
location on Alexanderplatz, the new tower is scheduled for delivery in late
2025. It will comprise 31,000 m2 of prime office and flexible space, 11,600 m2
of housing, and 17,000 m2 of event, service, logistics and retail space.
Designed on land purchased in 2016 as part of the acquisition of a portfolio of
hotels (including Park Inn Alexanderplatz), the project will be developed by
Covivio in partnership with two long-term institutional investors, Generali and
Covéa (Covivio having a 55% stake), based on a total investment of EUR530
million (EUR291 million Group share). The development offers a return on
investment of more than 5%, with a target value creation of around 40%.

2. Conversion of offices into housing

In France, Covivio plans to convert more obsolete offices into housing. Nearly
150,000 m2 of potential projects have thus been identified in obsolete office
buildings in France. Three projects are already under way, covering 12,300 m2
and representing EUR44 million in development costs. Five new commitments
totalling 92,000 m2 are planned for 2021, with a total cost of around EUR220
million: Covivio has secured planning permission for the first phase of a
46,500 m2 project in Bordeaux Lac and three redevelopments of 10,600 m2, 5,000
m2 and 7,300 m2 in Bobigny, Antony and Chartres. Permission for the fifth
project, in Fontenay-sous-Bois (22,850 m2), is expected by the end of the first
half.

3. Sale of mature assets: EUR500m in sales and preliminary agreements signed in
Q1

Since the start of the year, Covivio has finalised sales of EUR278 million
Group share, consisting almost entirely of offices in France. Covivio sold the
EDO building in Issy-les-Moulineaux (10,900 m2), purchased in 2011 when it was
occupied by Yves Rocher, vacated in 2015 and redeveloped with a 45% increase in
its surface area before being pre-let to Transdev. A portfolio of 46,000 m2 of
non-core offices in region was also sold at a higher price than the appraisal
value at end-2019. This transaction followed an asset management project which
enabled some of the leases with tenant Orange to be extended. Lastly, at the
end of March, the Astrolabe building (14,400 m2) in Marseille was purchased by
a consortium of investors.

Added to this is the EUR221 million Group share of new sales agreements signed
since the start of the year, with an average margin of 6% on the appraisal
value at end-2020. These agreements cover office buildings in major French
cities (including Lyon and Lille) and eight office buildings leased to Telecom
Italia. This portfolio was sold for EUR58 million (EUR30 million Group share),
above the 2020 appraisal value. In Germany, Covivio split the Alexanderplatz
development project in Berlin with Generali and Covéa; it retains a 55% stake
in the project. Covivio confirms its target to achieve over EUR600m (Group
share) in new sales agreements in 2021.

4. Continuing to attract new customers with a competitive offering

Quality of service and flexibility are now key requirements for office users.
Covivio had anticipated these developments in 2017, notably by launching
Wellio, its flex-office solution, and by ramping up its service offering: eight
Wellio sites are due to open in Europe in late 2021; already more than 80% of
multi-tenant buildings in France include a range of services and most have
access to the dedicated app; more than 80% of the France Offices portfolio has
green space. In recent months, Covivio has been pursuing its adaptation
strategy by blending its lease and flexi-contract solutions into a hybrid
offering. The Group seeks to involve users as far upstream as possible in the
design of the projects developed through its "All in One" approach. This ranges
from design thinking with customers to service operation and bespoke consulting
throughout the project. For example, in March Covivio delivered the Paris
Gobelins building (4,400 m2) in the 5th arrondissement, fully pre-let for 5
years firm under a service agreement.

Revenues at end-March 2021 stable on a like-for-like basis, excluding hotel
real estate

                Q1 2020   Q1 2021   Q1 2021                          Average
                Revenues  Revenues  Revenues  Like-for-              firm
                Group     100%      Group     like                   lease
Q1 2021         share               share     variation  Occupancy   term

France Offices   53.4      56.5      49.3       -1.2%      92.9%      4.6
Italy Offices    31.8      38.7      28.9       -1.1%      96.0%      7.3
Germany Offices   6.9      12.4      10.8       -1.0%      77.1%      4.6
Germany
Residential      39.3      63.7      40.9        3.4%      98.5%      n.a.
Offices and
Residential     131.4     171.3      129.9       0.3%      93.5%       5.4
Hotels in Europe 23.2      32.4       12.6     -46.2%     100.0%      13.9
Total strategic 154.6     203.7      142.5      -5.9%      94.5%       7.2
Total non
strategic         3.6      2.4         1.8      -4.7%      99.2%       6.0
Total           158.2    206.1       144.3      -5.9%      94.5%       7.2

Revenues at end-March amounted to EUR206 million and EUR144 million Group
share, stable on a like-for-like basis excluding Hotels (+0.3%). On a
like-for-like basis, office rent (60% of the portfolio) was down slightly due
to the full-year effect of releases of 2020. The occupancy rate is stable in
France at 93%. In Italy, the high occupancy rate of 96% is down slightly
compared with end-2020 due to the departure of a tenant from a ground- floor
retail asset in central Milan (Via Dante). Discussions are currently taking
place with a new tenant and are at an advanced stage. In Germany, the rate
improved slightly (+0.4 percentage points, to 77%), and rental discussions have
picked up since March.

In Germany Residential (25% of the portfolio), rents have increased by almost
4% on average in North Rhine- Westphalia, Hamburg, and Dresden and Leipzig,
which account for 50% of residential portfolio income. In Berlin, where the
rent cap legislation has been cancelled, like-for-like growth reached 2.9%. The
occupancy rate remains particularly high, at 98.5%.

As expected, the hotel sector (15% of the portfolio) was impacted by the
ongoing restrictions and lockdowns in Europe. It also suffered from an
unfavourable basis for comparison during the quarter (the health crisis mainly
had an effect from March 2020). Variable rent (3% of the portfolio,
predominantly AccorInvest hotels in France) was down -67%, while EBITDA for
hotels under management contract (3%, mostly in France and Germany) decreased
by -164%.

Carbon trajectory: ahead of target to achieve a 34% reduction by 2030

In 2018, the Science Based Targets initiative (SBTi) approved Covivio's carbon
footprint reduction targets of 34% by 2030 (vs 2010). This target covers the
wider scope for the construction and operation of Covivio's entire portfolio
(Scopes 1, 2 and 3) and does not take into account carbon offset initiatives.

At end-2020, Covivio's total carbon intensity (Scopes 1, 2 and 3) had been
reduced by 20.1% compared with 2010, to 61 kgeqCO2/m2. This performance was
largely facilitated by the greening of the portfolio: by end-2020, 88%(5) of
the portfolio had already been certified (target of 100% by 2025), of which
nearly 100% of the France Offices portfolio and 89% of Italy's portfolio.

General Meeting approves all resolutions

Today's General Meeting approved all resolutions with an average vote in favour
of 98.8%, including payment of a dividend of EUR3.60 per share. The ex-dividend
date is 26 April and the payment date is 28 April.

The General Meeting also re-elected the following members to the Board of
Directors: Sylvie Ouziel, independent director; Jean-Luc Biamonti, independent
director; Predica, a subsidiary of Crédit Agricole Assurances with a 7.8%
stake in Covivio. With these votes, the General Meeting acknowledges Covivio's
effective governance in line with best market practice, notably through the
separation of the roles of Chairman of the Board of Directors and Chief
Executive Officer, as well as the proportion of independent directors (60%) and
the diversity of the Board (40% women; highly complementary skills and
experience).

Organisational changes and appointments within Covivio's management

Tugdual Millet, current Chief Financial Officer of Covivio, has been appointed
Chief Executive Officer of Covivio Hotels, alongside Elsa Tobelem, from now on
Deputy CEO for Operations. This change in the organization of the Covivio
hotels subsidiary follows the departure of Dominique Ozanne, who has chosen to
pursue new professional projects. On this occasion, Paul Arkwright, current
Director of Financial Control, Corporate Finance and Investor Relations at
Covivio, becomes Group Chief Financial Officer. These appointments will be
effective from July, 1st.

Link to the dedicated press release

(5) Portfolio with environmental certification and/or accreditation (BREEAM,
HQE or LEED) for operation and/or construction. Excluding non-core assets in
France Offices, which make up less than 1% of the portfolio.

CONTACTS

Press Relations
Géraldine Lemoine
Tel.: + 33 (0)1 58 97 51 00
geraldine.lemoine@covivio.fr

Laetitia Baudon
Tel.: + 33 (0)1 44 50 58 79
laetitia.baudon@shan.fr

Investor Relations
Paul Arkwright
Tel.: + 33 (0)1 58 97 51 85
paul.arkwright@covivio.fr

Quentin Drumare
Tel.: + 33 (0)1 58 97 51 94
quentin.drumare@covivio.fr

ABOUT COVIVIO

Thanks to its partnering history, its real estate expertise and its European
culture, Covivio is inventing today's user experience and designing tomorrow's
city.
A preferred real estate player at the European level, Covivio is close to its
end users, capturing their aspirations, combining work, travel, living, and
co-inventing vibrant spaces.

A benchmark in the European real estate market with 26 BnEUR in assets, Covivio
offers support to companies, hotel brands and territories in their pursuit for
attractiveness, transformation and responsible performance.
Build sustainable relationships and well-being, is the Covivio's Purpose who
expresses its role as a responsible real estate operator to all its
stakeholders: customers, shareholders and financial partners, internal teams,
local authorities but also to future generations and the planet. Furthermore,
its living, dynamic approach opens up exciting project and career prospects for
its teams.

Covivio's shares are listed in the Euronext Paris A compartment (FR0000064578 -
COV) and on the MTA market (Mercato Telematico Azionario) of the Milan stock
exchange, are admitted to trading on the SRD, and are included in the
composition of the MSCI, SBF 120, Euronext IEIF "SIIC France" and CAC Mid100
indices, in the "EPRA" and "GPR 250" benchmark European real estate indices,
EPRA BPRs Gold Awards (financial + extra- financial), CDP (A-), 5 Star GRESB
and in the ESG FTSE4 Good, DJSI W orld & Europe, Euronext Vigeo (World 120,
Eurozone 120, Europe 120 and France 20), Euronext(r) CDP Environment France EW,
ISS ESG, Ethibel and Gaïa ethical indices.

Notations solicited:
Financial part:         BBB+ / Stable outlook by Standard and Poor's
Extra-financial part:   A1+ by Vigeo-Eiris

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17/04/2024 19:21

COVIVIO (EPA:COV) - Covivio - Activity at end-March 2021: encouraging perspectives

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