(AOF) – Covivio is organizing its investor meeting today (Capital Markets Day) in Berlin. In an environment impacted by inflation and rising interest rates, the real estate group is adjusting its strategy by prioritizing the strength of its balance sheet.
The group has thus set itself a target of 1.5 billion euros in disposals by the end of 2024, including 154 million euros in agreements already signed in recent weeks. Since the beginning of the year, the total of new disposal agreements thus stands at 441 million euros. To these announcements are added 300 million euros under discussion.
In offices, Covivio has decided to suspend two development projects whose construction has not yet started, in France and in Milan, for a cost price of 114 million euros. By adding the 394 million euros of assets delivered since June, the committed pipeline now amounts to 2 billion euros of total cost price, for 200 million euros of investment remaining to be disbursed on average per year. by 2026.
In the German residential segment, the group is adapting its strategy by favoring development operations, making it possible to limit financing needs while maintaining the creation of value in the form of the development margin. The weight of development operations thus increases from 35% to 65% of the pipeline, reducing financing needs by -30 million euros in 2023 and -100 million euros by 2025.
Covivio also continues to invest in improving its assets in operation, in particular to reduce its carbon footprint. The real estate group has set itself the ambition of reducing its greenhouse gas emissions by 40% by 2030. This ambition, which exceeds the regulatory objectives, is accompanied by an investment plan estimated at approximately 30 million euros per year by 2030, a large part of which is already included in the annual work plans for the buildings.
As part of the external heritage appraisal campaign for the second half of 2022, the real estate group received preliminary feedback showing a drop in asset values, between -2% and -3%. On the basis of these provisional data, the like-for-like change in the portfolio would be between -1% and 0% for the whole of the 2022 financial year.
AOF – LEARN MORE
Key points
– Fourth largest European property company, global operator from design to management, operating in offices, hotels and German residential;
– Assets of €27 billion spread 94% over 3 strategic countries: France for 38%, Germany for 41% and Italy for 16%;
– 57% in offices in France, Italy and Germany, 28% in German residential and 15% in European hotels;
– Economic model based on 4 pillars: presence in the heart of European cities, design of new or renovated real estate combining energy performance and adaptability to uses, customer culture by co-defining projects and extending the duration leases;
– Open capital with powerful shareholders – the Del Vecchio family (27.25% and 43.25% of the voting rights), ACM (7.71%), Crédit Agricole (8.2%) and Covea (7.2 %), Jean Luc Biamonti chairing the 16-member board of directors, Christophe Kullmann being managing director;
– Solid financial situation, with an LTV ratio down to 39.5% at the end of June.
Challenges
– European strategy to simplify structures, with offices being owned directly, hotels in Europe managed by the Foncière des Murs subsidiary and German residential under the Immeo brand;
– “Digital roadmap 2023” innovation strategy: 3 objectives: expand the range of customer services, build smart buildings and create value via data / partnerships with customers and start-ups / concrete research partnerships and carbon materials -Hub of prescribers, Sekoya platform, Impulse Partners- and with local authorities -Vitae project;
– Environmental strategy for a 40% reduction in CO2 emissions by 2030 vs 2010: intermediate objectives for 2025: 100% of the assets labeled or certified and 100% close to public transport / ecocircularity / participation in the 1
er
low-carbon real estate label for Europe / transformation of all debt into green bonds;
– Advances in the Wellio flexible office offer (99% occupancy rate);
– Tertiary development pipeline of €2.5 billion at the end of June, 84% located in Paris, Berlin and Milan and 61% pre-let and finalization of disposals financing the developments.
Challenges
– Change in revalued net assets or NAV, of €107.4, compared to the stock market price and the occupancy rate of office buildings (94.3%) and hotels (95%);
– Negative impact of inflation and construction delays offset by the indexation of rents;
– After a 2nd half of 11% recovery in activity, confirmed 2022 objective of earnings per share of €4.5.
Find out more about the real estate sector
A demand crisis
According to data from the Federation of Property Developers (FPI), the figures for the third quarter of 2022 continue to be alarming. Sales of new collective housing fell by 12.4% over one year, to 19,006 units. Over the first nine months of 2022, the decline reached 10.2%, to 72,670 units.
Reservations are also plummeting due to the collapse of bulk sales to social landlords and institutional investors. As interest rates rise, institutional investors renegotiate or halt operations. First-time buyers are penalized by the rise in rates and the tightening of the Pinel system puts off some private investors.
Due to the sharp rise in construction costs, the REIT estimates that one out of six authorized operations is ultimately not carried out for economic reasons.
Faced with this, prices are still rising: the sale prices of new collective housing increased by 5.9% throughout France in the third quarter of 2022. Ile-de-France is an exception, with a drop of 0, 9%.