COVIVIO (EPA:COV) - Covivio: First quarter 2019 activity

Transparency directive : regulatory news

24/04/2019 18:00

Paris, 24 April 2019

          First quarter 2019: Steady asset rotation and revenue growth

Steady asset rotation

- Launch of a new building on Symbiosis in Milan: 20,000m2 in offices already
  30% pre-let
- EUR325m Group share of deliveries scheduled in 2019, 86% pre-let on
  average.
- Pursuit of asset disposals: EUR360,5m Group share of new commitments, of
  which more than 70% in Italy

Solid like-for-like revenue growth of +3.3%

- Revenue Group share: EUR166.0m, up +13.5%, and +3.3% at a like-for-like
  scope
- France Offices: +4.2% like-for-like
- Italy Offices: +1.0% like-for-like
- Germany Residential: +4.1% like-for-like
- Hotels in Europe: +1.2% like-for-like

S&P upgraded the financial rating of Covivio to BBB+, outlook Stable

2019 General Meeting: Scrip dividend option and developments concerning the
Board of Directors
- Approval of the scrip dividend option with a subscription price of EUR81.29
- Renewal of the term of Jean Laurent as Chairman of the Board of Directors
- Appointment of two new Independent Directors, Christian Delaire and Olivier
  Piani

A leading European operator with a EUR23 billion (EUR15 billion Group share)
portfolio centred on major European cities, in particular Paris, Berlin and
Milan, Covivio supports companies, hotel operators, and regions in their
pursuit of attractiveness, transformation and responsible performance. A global
player covering all stages of the real estate value chain, the Group relies on
a European development pipeline of EUR6 billion to ensure its ongoing growth.

Steady asset rotation in the first quarter of 2019

Covivio pursued its asset rotation policy in the first quarter of 2019. First
by intensifying the development pipeline:
EUR1.3 billion Group share of projects were committed at end 2018, with an
additional EUR800m Group share slated for 2019, including a new project in
Milan, launched this quarter. Consequently, the Group is making progress with
regard to its strategic objectives, by strengthening its presence in the major
European cities, and meeting heavy demand for new spaces with high-quality
assets that are suited to new usages.

Meanwhile, Covivio has signed new disposals and new agreements worth EUR360.5m
Group share (EUR395.5m at 100%), with an average yield of 5.7% and a +2.5%
margin on the latest appraisal values. These sales, of which more than 70%
concerns assets in Italy, are in addition to the EUR274m Group share secured in
2018 and still to be completed.

Launch of Symbiosis building D, a new 20,000m2 office project in Milan already
30% pre-let

After delivery of the Fastweb headquarters building in 2018, Covivio launched
the third building in the Symbiosis Project. Building D represents 20,000m2 in
offices for a total investment of EUR84m and a yield of around 7%. 6,400m2 have
already been pre-let to a multinational to locate its Italian headquarters,
thus marking a new stage in the development of this innovative business
district. The lease was signed with rent of EUR315/m2 for the offices portion
and a firm maturity of 10 years (+6 years at tenant's discretion). Delivery is
scheduled for 2021.

For the record, another development project is ongoing for a 9,400m2 building
in the zone, entirely pre-let to ICS International School.

Average pre-letting rate of 86% on 2019 deliveries

2019 deliveries total EUR325m Group share (EUR399 million at 100%) of projects
across all asset classes. These include five office projects in Milan,
Bordeaux, and Lille totalling 63,000m2, five hotels in Paris, Lyon, and Munich
for 790 rooms, and 454 housing units in Berlin.

Two of these projects were delivered this quarter, for a EUR54m total cost
(EUR36m Group share) and 6.9% yield, both fully let: the Hélios Project for
9,000m2 of offices in Lille, leased by the Caisse d'Epargne group, and the
173-room Meininger Hotel in Munich. The three remaining projects for delivery
this year are already 86% pre-let on average.

Disposal of a portfolio of 10 assets in Italy for EUR263.5m

Covivio signed a sale agreement on a portfolio of mature and non-core assets
for EUR263.5m, including the building on Via Montebello in Milan and nine
assets located in secondary locations in Italy (Rome, Bologna, Venice, etc.).
The price is slightly higher than the latest appraisal value and shows a net
yield rate of 4.9%. Ownership will be transferred in December 2019.

Disposal of an office building in Charenton

In France, Covivio signed EUR68m worth of new commitments with a slightly
positive margin over the latest appraisal value. The Group entered into a sale
agreement on an asset located in Charenton-le-Pont, for EUR54m. This building,
totalling 11,500m2 in offices, is fully let to Natixis for 4.5 years firm.
The rest of the disposals involve six non-core assets for EUR14m, located in
the outer suburbs of Paris and in secondary cities in the regions.

Disposal of the Westin Hotel in Dresden

In hotels, Covivio sold the five-star Westin Bellevue in Dresden, with 340
rooms, for EUR48.5m (EUR21m Group share), with a margin of +8.8% on the
appraisal value. In addition, the Group is keeping the adjacent land reserve
that has strong residential development potential, thus feeding its development
pipeline in Germany.

Revenue at end March: Solid like-for-like growth of +3.3%

Revenue for the quarter, which stood at EUR166.0m, up +13.5%, benefited from
strong investment in 2018, mostly the merger with Beni Stabili and acquisitions
in Hotels.

Like-for-like revenue increased by +3.3%, compared to +3.2% in 2018. This solid
performance is the fruit of the portfolio transformation ongoing since 2015,
and reflects the good performance of our rental markets.

> In France Offices, the increase of +4.2% like-for-like is primarily the
  result of 2018 new leases (+2.3 pts), realized mostly starting from  the
  second  quarter  2018.  The  positive  impact  will  thus be progressively
  smoothed during 2019. Indexation contributed +1.2 pt and renewals +0.7 pt.

> In Italy, rental income increased by +1.0%. The offices portfolio in Milan,
  excluding Telecom   Italia, recorded growth of +1.3%. On this portfolio, the
  Group benefits from a 98.0% occupancy rate at end March 2019.

> Rental performance in Germany Residential remains high, at +4.1%
  like-for-like, driven by the dynamism of Berlin (+5.0% like-for-like).
  26% of this growth is generated by indexation, 28% by re- letting, and 46%
  comes from modernisation.

> Lastly, in Hotels, revenue increased +1.2%. The performance is due to the
  repositioning works realized by Accor on some hotels with variable rents, in
  order to enhance their future growth.

The occupancy rate and the maturity of the leases are staying high across all
assets, respectively at 98.1% (+0.1 pt compared to end 2018), and 7.1 years
firm (+0.1 year compared to end 2018).

First quarter 2019  Revenue  Revenue  Change     Change     Occupancy   Term of
                     100%     Group           like-for-like    rate     leases
                    (EURm)    (EURm)     (%)       (%)         (%)      (years)

France Offices       66.6     59.3      -2.9%     +4.2%       97.4%        4.7
Italy Offices        46.8     36.0     +80.2%     +1.0%       98.1%        7.4
Germany Residential  61.9     39.7      +4.9%     +4.1%       98.5%        n.a.
Hotels in Europe     65.3     24.7       n.a.     +1.2%        100%       14.0
Hotels in lease      57.8     21.8     +34.2%     +1.2%        100%       14.0
Hotel operating
properties            7.5     3.0      -18.3%     +1.3%         n.a.       n.a.
Total strategic
activities          240.7     159.8    +15.1%     +3.3%        98.2%       7.2
Non-strategic
activities
(Retail in France
and Italy, France
Residential)          8.0      6.2     -16.5%     +1.8%        94.6%       4.6
Total               248.7    166.0     +13.5%     +3.3%        98.1%       7.1

S&P upgraded the financial rating of Covivio to BBB+, outlook Stable

S&P announced it had revised the financial rating of Covivio from BBB to BBB+,
Stable outlook. This improvement comes 9 months after having placed the rating
in Positive outlook, recognising the company's improved operational and
financial profile.

This upgrade is due to the portfolio's repositioning since 2015, thanks to
steady asset rotation and reinforcement around Paris, Berlin, and Milan. This
transformation has allowed an acceleration of growth in the past two years,
along with a solid outlook across all of Covivio's markets.

In addition, S&P underlines the company's improved financial profile, as a
result of the revised Loan to Value target of "less than 40%", compared to the
previous "40% to 45%". Beyond the regular policy of asset disposals to finance
its investments, Covivio is in capacity to reach this target by end 2019,
thanks to the scrip dividend option.

2019 General Meeting: Scrip dividend option, and developments on the Board of
Directors

Scrip dividend option

The Combined General Shareholders' Meeting of 17 April 2019 approved the amount
of the dividend, paid in respect of fiscal year 2018, of EUR4.60 per share (a
+2.2% increase compared with 2017), as well as the scrip dividend option. The
issue price of the shares concerned by the scrip dividend option is set at
EUR81.29 ( link to dedicated PR).

This transaction will enable Covivio to make significant progress toward the
LTV objective of below 40%, while still being able to invest in the development
pipeline, which offers high profitability (6.1% yield on the total development
cost of committed projects). The shareholders represented on the Covivio Board
of Directors (Delfin, Covea, Predica and ACM, representing 49% of the share
capital), have already undertaken to subscribe to this option.

Renewal of the term of the Chairman of the Board of Directors, and appointment
of two new Independent Directors

Further to the General Meeting of 17 April 2019, the term of Jean Laurent as
Chairman of the Board of Directors was renewed for four more years.
Shareholders also approved the appointment of two new Independent Directors,
Christian Delaire and Olivier Piani.

Christian Delaire (ex-CEO of Generali Real Estate and AEW Europe) and Olivier
Piani (ex-CEO of Allianz Real Estate and GE Capital Real Estate Europe) bring
their expertise in real estate and international business to the Board of
Directors.

Paris, 24 April 2019 at 18.00

CONTACTS

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

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

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

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 23 BnEUR in assets, Covivio
offers support to companies, hotel brands and territories in their pursuit for
attractiveness, transformation and responsible performance.
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 + Sustainability), CDP (A), Green Star GRESB
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,
Oekom, Ethibel, Sustainalytics and Gaïa ethical indices.
Covivio is rated BBB+/outlook Stable by Standard and Poor's.

APPENDIX

Reconciliation with IFRS accounts

                            Revenues Q1 2019   Minorities  Revenues Q1 2019

France offices                     66.6           -7.3          59.3
Italy offices                      46.8          -10.8          36.0
Germany Residential                61.9          -22.2          39.7
Hotels in lease                    57.8          -36.1          21.8
Strategic activities              233.2          -76.3         156.8
Non-strategic activities            8.0           -1.9           6.2
Total rental income               241.2          -78.2         163.0
Operating hotel
properties (EBITDA)                 7.5           -4.5           3.0
Total Revenue                     248.7           -82.7        166.0

Glossary

Definition of the acronyms and abbreviations used:
RevPar: Revenue per Available Room
Mietspiegel: Reference index for residential rents in some German cities
GS: Group share
Chg: Change
ED: Excluding Duties
ID: Including Duties
MRV: Market Rental Value

Firm residual term of leases

Average outstanding period remaining of a lease calculated from the date a
tenant first takes up an exit option.

Like-for-like change in rent

This indicator compares rents recognised from one financial year to another
without accounting for changes in scope: acquisitions, disposals, developments
including the vacating and delivery of properties. The change is calculated on
the basis of rental income under IFRS for strategic activities.

This change is restated for certain severance pay and income associated with
the Italian real estate (IMU) tax.

Given specificities and common practices in German residential, the
Like-for-Like change is computed based on the rent in EUR/m2 spot N versus N-1
(without vacancy impact) on the basis of accounted rents.

For operating hotels, like-for-like change is calculated on an EBITDA basis.

Restatement done:

o Deconsolidation of acquisitions and disposals realized on the N and N-1
  periods
o Restatements of under work assets, ie. :

  - Restatement of released assets for work (realized on N and N-1 years)
  - Restatement of deliveries of under-work assets (realized on N and N-1
    years).

Occupancy rate

The occupancy rate corresponds to the spot financial occupancy rate at the end
of the period and is calculated using the following formula:

1 - Loss of rental income through vacancies (calculated at MRV)
Rental income of occupied assets + loss of rental income

This indicator is calculated solely for properties on which asset management
work has been done and therefore does not include assets available under
pre-leasing agreements. Occupancy rate are calculated using annualised data
solely on the strategic activities portfolio.

The indicator "Occupancy rate" includes all portfolio assets except assets
under development.

Projects

Committed projects: these are projects for which promotion or construction
contracts have been signed and/or work has begun and has not yet been completed
at the closing date. The delivery date for the relevant asset has already been
scheduled. They might pertain to VEFA (pre-construction) projects or to the
repositioning of existing assets.

Controlled projects: These are projects that might be undertaken and that have
no scheduled delivery date. In other words, projects for which the decision to
launch operations has not been finalised.

Rental income

Recorded rent corresponds to gross rental income accounted for over the year by
taking into account deferment of any relief granted to tenants, in accordance
with IFRS standards.

The like-for-like rental income posted allows comparisons to be made between
rental income from one year to the next, before taking changes to the portfolio
(e.g. acquisitions, disposals, building works and development deliveries) into
account. This indicator is based on assets in operation, i.e. properties leased
or available for rent and actively marketed.

Annualised "topped-up" rental income corresponds to the gross amount of
guaranteed rent for the full year based on existing assets at the period end,
excluding any relief.

Yields/return

The portfolio returns are calculated according to the following formula:

Gross annualised rent (not corrected for vacancy)
Value excl. duties for the relevant scope (operating or development)

The returns on asset disposals or acquisitions are calculated according to the
following formula:

Gross annualised rent (not corrected for vacancy)
Acquisition value including duties or disposal value excluding duties

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COVIVIO (EPA:COV) - Covivio: First quarter 2019 activity

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