COVIVIO (EPA:COV) - Covivio - Activity at end-September 2021: Positive dynamics on all markets

Transparency directive : regulatory news

21/10/2021 17:45

Paris, 21 October 2021, 6:00 pm

      Activity at end-September: positive dynamics across all activities

Offices: recovery in rental activity and success of development pipeline

> Business revives in all our markets: take-up rises +32% year-on-year in
  France, +40% in Milan and +16% in the top 6 German cities
> Portfolio leases gather pace: 134,000 m2 let or pre-let since January 2021,
  more than half (70,680 m2) in Q3 alone
> Success of the development pipeline:
  o 2 deliveries in Lyon CBD (30,900 m2) and Milan Symbiosis (18,500 m2),
    respectively 64% and 92% let
  o New Moncler headquarters launched in Milan: 38,000 m2 pre-let for 15 years
> Accelerated conversion of offices into housing: 70,000 m2 of new committed
  projects in Q3

Germany Residential: growth continues

> Market driven by the lack of housing, around 670,000 units of which 205,000
  in Berlin
> Rental growth continues: +4.1% like-for-like growth in rental income
> Upside potential in asset values confirmed by recent market deals

Hotels: recovery confirmed

> Sharp rebound in RevPar over the summer: up +67% on average in Europe vs
  2020
> Visible recovery in hotel performance: Q3 variable revenues up 216% vs 2020

Good performance at end-September

> Like-for-like revenues rise sharply compared to H1: stable at end-September
  vs a -2.7% at end-June
> EUR514 million in preliminary sale agreements (up EUR110 million in Q3) at
  an average margin of +3.4% on latest appraisal values: on track to hit the
  target of over EUR600 million for 2021
> Covivio's CSR excellence recognised: with a GRESB score of 90/100 (up 5
  points on last year), Covivio has reinforced its status as Global Sector
  Leader

2021 outlook

> EPRA Earnings 2021 guidance of over EUR400 million

Offices: recovery in rental activity and success of development pipeline

The recovery begun in the first half of 2021 accelerated in the third quarter
In Greater Paris, take-up improved by +32% year-on-year to 1.2 million m2. In
Milan, take-up was 267,000 m2, up 40% on 2020 and in line with its 5-year
average. In leading German cities, 2.1 million m2 have been let since the start
of the year, up 16% year-on-year, mainly driven by new or restructured assets
in well-established business districts(1).

This shows that Covivio's strategy, focused on centrality, development and
service offering, is bearing fruit. Thanks to an offer increasingly focused on
central locations, flexibility and user well-being, Covivio has seen its rental
activity accelerate over recent months. At end-September, 134,000 m2 was let or
pre-let for an average firm lease term of nearly 11 firm years. Over half of
this area (70,680 m2) was let or pre-let in the third quarter alone.

Covivio's know-how and reputation for high-quality development makes it a
partner of choice for companies looking to offer employees a
performance-enhancing work environment that encourages collaboration and
creativity. This approach has won over many multinationals. At Symbiosis D, new
tenants include LVMH Italia who leased part of the 7,800 m2 let in 2021,
following the Mars group in 2020. In Paris, Roland Berger and Samsung have
signed 9- year leases on 3,700 m2 and 10,500 m2 of space, respectively, in the
Jean Goujon and So Pop assets. In Bordeaux, Onepoint took 9,100 m2 of the
Jardin de l'Ars project under a 12-year lease. Two off-plan sales were also
signed this year in Italy: 19,000 m2 in the future SNAM headquarters in the
Symbiosis complex, and 4,000 m2 for a scheme of The Sign area.

Covivio also began work on Moncler's future 38,000 m2 headquarters in the
Milan-Symbiosis complex, pre- let for 15 years under a firm lease. The deal
rounds off Covivio's successful development of the area, ongoing since 2016,
with an occupancy rate of over 96%. A success which will continue with the
future development of the Scalo di Porta Romana area (north of Symbiosis),
acquired by the Covivio-Coima-Prada consortium to design a new business
district linked to the heart of Milan and including the 2026 Milan Cortina
Olympic village.

Two other offices schemes have been launched this quarter in the CBDs of Paris
and Berlin. The first, of 5,850 m2 in the immediate proximity of St Lazare
train station, will be redeveloped by 2023 and will welcome Covivio's future
Parisian headquarters. Formerly let to Orange, it illustrates the development
potential and the associated value creation of Parisian portfolio. The second
one is located in the Moabit district in the heart of Berlin. Adjacent to a
residential building of Covivio, it will welcome its first tenants in 2023 on
6,000 m2 of which 900 m2 new extension. These two projects amount a total cost
of EUR141 million including land (EUR127 million group share) with a target of
30% value creation.

In the third quarter, Covivio delivered two office assets, in Lyon CBD and
Milan Symbiosis. Occupying a prime location in Lyon city centre, 200 metres
from the Gare de Lyon Part Dieu railway station, the 30,900 m2 Silex² tower
embodies Covivio's vision for the office of tomorrow. Including leases
currently being negotiated, Covivio expects an occupancy rate of close to 90%
by year-end (currently 64%). The delivery of Symbiosis D in Milan has also been
a success, with an occupancy rate of 92% (100% for its office space). These
deliveries are expected to generate value creation of around 30%.

New strategic focus in a changing office environment with a further
acceleration of office conversion into housing. In the third quarter, three new
projects were launched in the Paris region and Bordeaux representing around
1,100 housing units totalling 70,000 m2. The projects are located in former
office buildings and support the transformation of areas that are being
converted toward residential use. The residential committed pipeline in France
is now EUR312 million (EUR257 million Group share) and includes 1,543 housing
units under construction with an expected margin of over 10%.

(1) Sources:JLL, Savills, CBRE

Germany Residential: growth continues

In Germany, the demographic fundamentals still apply. In 2021, the shortage of
residential space was estimated to be 670,000 housing units, around a third of
these in Berlin. This figure is on a rising trend as the number of building
permits granted fell again in July by -0.8%. The scarce supply drove average
Berlin rents up +9.5% year-on-year to
EUR13/m2 for existing apartments and up +12.0% to EUR20/m2 for newbuild
apartments.(2)

Energy renovation of the portfolio, driver of rental growth. Covivio is
currently the only residential operator in Germany to have HQE certification
for the whole of its portfolio. The Group is committed to improving the energy
performance of its residential portfolio through an ambitious capex programme
of over EUR50 million per year (EUR35 million Group share). This investment
contributed more than 45% to the 4.1% like-for-like growth in rental income.

Increased upside potential in asset values. The recent Heimstaden-Akelius deal,
done at EUR4,700/m2(3) for a portfolio three-quarters in Berlin and one-quarter
in Hamburg, confirms the upside in the value of Covivio's German portfolio,
appraised at end-June at EUR3,194/m2 in Berlin and EUR3,813/m2 in Hamburg.

Hotels: recovery confirmed

The successful vaccination campaigns in Europe and lifting of Covid
restrictions led to a recovery in hotel performance over the summer. European
RevPar rose by an average +67% in July and August year-on-year (38% below 2019
levels). Countries with more domestic and leisure customers did best out of the
return of European tourism, with performances at least matching 2019 for hotels
in seaside locations. France outperformed Europe with RevPar 28% below its 2019
level. The strong trend persisted through September with an occupancy rate for
European hotels averaging 60% (63% in France). This compares to 37% in 2020 and
81% in 2019 and RevPar up +97% year-on-year.

              Evolution of average occupancy rate in Europe(4)

This trend is good for Covivio's hotels: third quarter revenues were up 42%
year-on-year of which +216% on variable revenues (56% of hotels revenues). Rent
collection was 93% at end-September (79% including rent relief and deferred
payments).

In this steady recovery of activity, Covivio can take advantage of its
strategically diversified portfolio for operators, thanks to its location
(average Booking.com score of 8.8/10) and intrinsic profitability (average
effort rate of 60% in 2019). Covivio's hotel portfolio is well positioned to
benefit from the recovery: variable revenues, concentrated in France and
Germany, as well as revenues from the UK portfolio, are generated mainly by
domestic and regional customers travelling individually for leisure(5).

(2) Sources: Guthmann, Destatis
(3) Sources : Green Street advisors estimates
(4) Sources: MKG

Sustained trend in disposals, on track to hit target of over EUR600 million

In the third quarter, Covivio signed EUR110 million of sales agreements (Group
share), taking total disposals agreed since January to EUR514 million, with a
+3.4% margin over the latest appraisal values. During the quarter, the Group
continued its sale of non-core assets in France and Italy (totalling EUR41
million) and signed a further EUR52 million of residential disposals in
Germany.

Offices accounted for over 75% of the total, including EUR195 million of
non-core assets in Italy, primarily leased to Telecom Italia (at a +2% margin),
and EUR120 million of mainly mature assets in France (Lyon and Lille). This
means that Covivio will have signed off more than EUR1.1 billion in office
sales since January 2020, at an average margin of over +5% over the latest
appraisal value. Active portfolio rotation is part of the policy of
continuously refocusing assets on city centres and helps finance the
development pipeline, now standing at EUR1.3 billion and expected to create
value of EUR450 million(6).

Covivio confirms its target of over EUR600 million in new sales agreements in
2021.

Commitment to CSR: Covivio again recognised in GRESB rankings

Covivio has retained its status as "Global Sector Leader" and "Overall Regional
Sector Leader" in the GRESB 2021 rankings "Diversified Portfolio -
Office/Residential" category among all companies in the sector.

Every year, GRESB assesses and ranks the ESG (environmental, social and
governance) policies, action plans and performance of over 1,500 companies
operating in the building and real estate sector worldwide. With a score of
90/100, up five points for the second year running, Covivio has consolidated
its "5 Star" rating and "Sector Leader" status. The overall average rating of
peers edged up three points this year (73/100 in 2021 versus 70/100 in 2020).
Covivio also scored a maximum 100/100 in the "Public Disclosure" category for
the high quality and transparency of its reporting.

Like-for-like revenues at end-September mark clear improvement since end-June

                  9M 2020      9M 2021    9M 2021                    Occupancy
                  Revenues     Revenues   Revenues     Like-for-like  rate Sep.
                  Group share  100%       Group share  variation      2021

France Offices        158        166          144          -3.3%      92.1%
Italy Offices          96        115           87          -0.9%      96.8%
Germany Offices        38         38           33          +0.1%      78.7%
Germany Residential   118        195          126          +4.1%      99.0%
Hotels in Europe       45        128           51          +2.2%     100.0%(1)
Total strategic
activities            455        642          441           0.0%      94.6%
Total non-strategic     9          6            4          -9.0%      98.3%
Total                 464        648          445          -0.1%      94.6%

1. Hotels: lease properties only

Rental income for the first 9 months of the
year amounted to EUR648 million in total and EUR445 million Group share. At
like-for-like scope, this performance is a marked improvement on H1 (stable at
end-September vs down 2.7% at end-June), thanks to the ongoing growth in
Germany Residential and beginning of the hotel recovery.

(5) In detail : share of domestic or regional = 80% ; share of leisure =
    55%-60% ; share of individual clients = 75%
(6) Development pipeline at end-June 2021

In offices, the performance in France reflects the hangover from releases of
2020 while the pick-up in rental activity has yet to feed through. It is
expected to improve slightly by year-end. In Italy, rents were depressed by the
exodus of retail tenants from building street fronts in Milan city centre.
These have since been re-let so that the occupancy rate is stable at 96.8%.

In Germany, growth continues with rents rising by +4.1% like-for-like, vs +3.8%
at end-June. The trend is positive across all regions, with growth of +4.8% in
North Rhine-Westphalia and +3.1% in Hamburg. In Berlin, like- for-like growth
was +4.1%. Remember that on 15 April, the Karlsruhe Federal court struck down
the Mietendeckel rent freeze and cap regulations in Berlin, which had had a
counter-productive impact on housing supply. The occupancy rate remains
particularly high, at 99%.

Strong improvement in hotel revenues. Rents at end-September were up +1.6%,
compared to a -4.1% fall at end- June, including a +16% rise in variable rent
(Accor, mainly in France). EBITDA from hotel operating properties is also
growing once more, up +9.8% year-on-year.

2021 earnings guidance

Given the accelerating recovery in the hotel activity over the summer, Covivio
announces an EPRA Earnings guidance of more than EUR400 million for 2021 (over
EUR4.2 per share).

Medium term, Covivio has major growth drivers:

- In Offices, the strategy of developing new buildings tailored to user demands
  should continue to deliver substantial value creation. EUR450 million
(EUR4.80 per share) of value creation not yet reflected in the books is
  therefore expected from projects committed or to be committed over the next
  few months.

- In hotels, the lifting of Covid restrictions should allow a steady recovery
  in activity during the second half of the year. The over EUR70 million
  revenue fall in 2020 compared to 2019 should translate into equivalent
  upside over the next few years.

- Finally, in Germany Residential, the current value of the portfolio, over 50%
  below the individual selling prices of housing units, and rent levels, 20%
  below regulated levels, should drive future growth.

AGENDA

- Capital Markets Day:    13 December 2021
- Annual results:         22 February 2022

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,
and in the ESG FTSE4 Good, DJSI World & Europe, Euronext Vigeo (World 120,
Eurozone 120, Europe 120 and France 20), Euronext(r) CDP Environment France EW,
Stoxx ESG, Ethibel and Gaïa ethical indices, and has been awarded EPRA BPRs,
CDP (A-), 5 Star GRESB(5-Star, Sector Leader), Vigeo-Eiris (A1+), ISS-ESG (B-)
and MSCI (AA).

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

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COVIVIO (EPA:COV) - Covivio - Activity at end-September 2021: Positive dynamics on all markets

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