Covivio - 2024 Half-year results: Transforming semester and improved outlook

Paris, 22 July 2024, 7:00 am

First-half 2024 results

Transforming semester and improved outlook

« The first half of 2024 marks a turning point for Covivio. While strengthening its financial structure, the Group has demonstrated its ability to seize opportunities, with the increase of its exposure to hotels, the signing of a memorandum of understanding with AccorInvest and a new partnership in German residential. At the same time, the success of the premium office offer has led to a sharp rebound in occupancy rate. As a result of this strong momentum, Covivio has raised its recurring net result guidance for

2024.»

Christophe Kullmann, CEO of Covivio

Major strategic progress in the first half

Strengthening financial structure 

+6.5% growth in revenues on a like-for-like basis

Recurring net result up +3% and asset values stabilizing

►       Recurring net result (adjusted EPRA Earnings) up +3% to €231 million (€2.24 per share, down 4.8%) 

► Portfolio value growth of +2%, to €15.4 billion (Group share). On a like-for-like basis, values start to stabilize  (-1.3%), thanks to a slight increase in hotels and stability in offices (in Paris and Milan) and German residential.  ► EPRA NTA (Net Tangible Assets) up +2.3% to €8.7 billion (-7.5% per share, to €77.7)

ESG strategy: new progress in indicators

►       96% of the portfolio is certified, with 69% of the office portfolio certified HQE/BREEAM Very Good or above

►      Further increase in the proportion of debt linked to ESG objectives, to 61% from 57% at end-2023 and 38% at end-2022

Improved 2024 outlook 

► Extracting growth potential, through reversion, asset management work (including the expected finalization of the asset swap with AccorInvest in the 2^nd half of the year) and indexation

► 2024 recurring net result guidance (adjusted EPRA Earnings) of around €460 million (compared with an initial guidance of €440m), up +6% vs. 2023

Adjusted EPRA Earnings and EPRA NTA, NDV and NRV are alternative performance indicators as defined by the AMF and are detailed in Sections 3. Financial information, 5. EPRA reporting and 7. Glossary of this document. The audit procedures on the consolidated financial statements have been completed. The certification report will be issued after the specific verifications.

Key operating and financial indicators

  * Adjusted EPRA Earnings 

Covivio: a diversified and constantly improving portfolio  

Covivio’s portfolio worth €23.0 billion (€15.4 billion Group share) in Europe, managed according to 3 strategic pillars:

1.     Location in the heart of European capitals and main business and leisure hubs, particularly in Paris, Berlin and Milan. As a result, 94% of our assets are located in central locations^[1] while 99% are within fiveminute walk from public transport.

2.     An innovative and scalable hospitality approach, inspired by hotel expertise, to keep pace with evolving user expectations. This is reflected in a strengthened operator approach, an ambitious service policy and customer relations, backed up by flexible, tailor-made offers. This approach has been welcomed by the customers using Covivio buildings, with the Kingsley survey of 270 office users in France, Italy and Germany revealing an overall satisfaction rate of 3.9/5 (compared with a benchmark of 3.6).

3.     Sustainable development: Covivio is an operator committed to the climate transition, for a positive and lasting impact on cities. This objective is notably illustrated by an ambitious carbon trajectory (-40% reduction in emissions from 2010 to 2030) and is praised by the main rating agencies. 

The portfolio comprises 50% (-2pts vs. end-2023 and -10pts vs. 2020) of offices in France, Italy and Germany, of which 69% in city centers (vs. 59% in 2020) and 25% in the major business hubs; 30% (-1pt) of Germany residential, mainly in Berlin (57% of the residential portfolio); and 20% (+3pts) of hotels located in major European tourist destinations (Paris, Berlin, Rome, Madrid, Barcelona, London, etc.), leased or managed by leading operators: Accor, IHG, Marriott, B&B, NH Hotels, etc.).

42% of the portfolio is located in Germany, 34% in France, 17% in Italy and 7% in other European countries.

Major strategic progress in the first half 

Significant increase in hotel exposure 

During the first half, Covivio acquired a 8.7% stake in its subsidiary Covivio Hotels, in exchange for new Covivio shares, mainly from Generali, and now holds 52.5% of the capital of Covivio Hotels. 

This operation is part of a strategic move to rebalance the portfolio, by increasing exposure to the hotel sector, which has demonstrated its ability to outperform inflation and GDP growth over a long period and offers promising growth prospects. The number of overnight stays is expected to increase by 5%/year between now and 2030², while future supply represents only 2% of the existing stock on average in Europe.

With this contribution, which is equivalent to the acquisition of €500 million of assets, Covivio is strengthening its position in one of the highest-quality portfolios on the market, comprising 311 prime hotels, 90% located in major European tourist destinations such as Paris, Berlin, Rome, London, Barcelona and Madrid.

The proportion of hotels in Covivio's portfolio now stands at 20%, compared with 17% at the end of 2023, speeding up the process of rebalancing the portfolio between hotels, offices and residential units.

Signing of a memorandum of understanding with AccorInvest for a value-creating hotel swap  

In parallel, Covivio has taken a significant step towards unlocking the value creation potential of its hotel assets. In June, Covivio Hotels signed a memorandum of understanding with AccorInvest to consolidate the ownership of jointly owned hotel operating and property companies, in line with the terms defined at the start of exclusive negotiations in November 2023.

Covivio Hotels owns 54 hotels let to AccorInvest under long-term variable-rent leases based on revenues. AccorInvest owns and operates the operating companies of these hotels and has signed long-term management contracts with Accor Group.

The memorandum concerns the acquisition by Covivio Hotels of 24 hotel operating companies³ - allowing the consolidation of these hotels, which will be owned and operated by Covivio Hotels – in exchange for the disposal to AccorInvest of 10 other hotel property companies, which will then be owned and operated by AccorInvest.

The agreed value of the property companies sold to AccorInvest is €208 million⁴ while the value of the operating companies acquired by Covivio Hotels is €266 million⁵. Based on 2023 figures, the assets transferred to AccorInvest represent annual rental income of €11 million, while the operating companies acquired by Covivio Hotels generate EBITDA of around €31 million.

The deal enables Covivio Hotels to acquire operating companies in major tourist areas with considerable potential for value creation through repositioning and management optimisation. Some of these hotels will continue to operate under Accor brands (under management or franchise agreements), while others will be rebranded.

The deal completion is expected for the last quarter of 2024. 

Creation of a joint venture in German residential 

During the first half of the year, Covivio and CDC Investissement Immobilier signed a strategic partnership agreement on German residential, through the acquisition by CDC Investissement Immobilier of a 49% stake in a Berlin portfolio (39% from Covivio Immobilien, a 61.7%-owned Covivio subsidiary, and 10% from Covivio).

This portfolio, representative for Covivio's Berlin residential portfolio, comprises 8 assets located in several of Berlin's most attractive districts and totals around 70,000 m² (including 770 flats, 15,800 m² of retail space and a 274 public

2 Source: Oxford Economics

3 Through acquisition of shares in operating companies 4 Excluding duties 

5 Including duties  

car park spaces). The deal was signed on the basis of a portfolio valuation of €274 million (at 100%), in line with the appraisal values at the end of December 2023. The mortgage financing of the portfolio has been maintained. 

The set up of this joint venture illustrates CDC Investissement Immobilier's interest in the Berlin residential market and highlights the quality of the portfolio and the expertise of Covivio's local teams. These teams will continue to provide asset and property management services for the portfolio, implementing an ambitious strategy to improve environmental performance by 2030, in line with the ESG objectives of both partners. 

Success of premium offer in offices 

The first half of the year was also marked by the success of the premium offices offer, based on three pillars: centrality, sustainability and hospitality.  

This strategic positioning and innovative offering have enabled Covivio to benefit from a favorable rental dynamic across its entire office portfolio. A total of 74,100 m² of new lettings and renewals were signed in the first six months of 2024.

Most of our office portfolio (69%) is located in city centers, offering significant reversion of +9% on average for core assets, including +15% in city centers. This is particularly true in Paris CBD (+22% on 3,661 m² in the Avenue Delcassé building), Frankfurt (+55% on 1,502 m² in FAC), Berlin (+43% on 1,438 m² in the Fischerinsel building) and Milan city center (+39% on 867 m² in Via Messina, +20% on 718 m² in Via Rombon). 

Covivio has also signed numerous successful leases across the rest of its portfolio: in France, an additional  2,700 m² at Maslö in Levallois-Perret (100% let), 1,800 m² in Urban Garden in Issy-les-Moulineaux (now 84% occupied, one year after vacating), 1,270 m² in the IRO building in Châtillon (69% occupied) and 2,200 m² in Belaïa in Orly airport (96% occupied), now directly accessible by metro line 14. There were also several letting successes in Germany, with 3,100 m² let in Sunsquare building in Munich (79% occupied) and 1,270 m² renewed in Zeughaus in Hamburg. In Milan, 30,000 m² were renewed in the Lorenteggio building.

As a result, the occupancy rate has risen sharply, by +3pts since Q1 2023 and by +0.6pt over the semester, to 95.1%.

Strengthening the financial structure 

€311 million of new disposal agreements signed in 2024

In a sluggish investment market, Covivio has signed disposal agreements worth €311 million Group share (€455m at 100%), with an average margin of +3% vs. end-2023 appraisal values and an average yield of 5.0%. The Group is therefore in line with its €1.5 billion disposal program between end-2022 and end-2024, with almost €1.2 billion, or 80% of the plan already secured. 

Offices accounted for the largest part of disposal agreements, with €142 million Group share (€183 million at 100%), and an average margin of -1.6%. The disposals involved a total of 21 assets, including 12 in France (mainly noncore office buildings converted or to be converted into residential) and 9 in Italy (mainly from the Telecom portfolio, in the regions). 

In German residential, €129 million Group share (€189 million at 100%) was sold at an average premium of +5.6%, with the creation of the joint venture with CDC, in line with end-2023 values, contributing €93 million (Group share) to the disposal program, and the pursuit of privatizations for €25 million Group share (€38 million at 100%), at an average premium of +40%.

In hotels, disposal agreements totaled €40 million Group share (€83 million at 100%), at an average premium of +10.7%. These mainly concerned non-strategic hotels in Germany and Spain, as well as joint disposals with AccorInvest. 

Equity reinforced by €536 million over the half-year 

Equity was strengthened by €536 million over the first half: €280 million from the exchange of shares for Covivio Hotels, and €256 million from the scrip dividend, subscribed to by 77.5% of the share capital at €38.6 per share, reflecting the support of our shareholders, particularly the major ones, represented on the Board of Directors. 

€1.3 billion in financing or refinancing 

Since the beginning of the year, Covivio has secured more than €1.3 billion in financing or refinancing (€709 million Group share) with an average maturity of 7 years, from both the bond and banking markets. 

In May 2024, Covivio Hotels issued €500 million in green bonds maturing in 2033, with a spread of 148 bps. The issue was largely swapped into floating rates, to take advantage of the Group's very good hedging position. Also, €765 million worth of mortgage financing was secured, mainly on hotels portfolios in Spain and residential assets in Germany.

The Group's net available liquidity continued to rise to €2.5 billion (vs. €2.4 billion at end 2023). It now covers all debt maturities until end of 2026. 

Improved debt metrics  

The loan-to-value ratio (LTV) fell again in the first half, by 50 bps to 40.3%. This ratio, aligned closely to the LTV policy of less than 40%, will benefit from the full effect of recurring earnings in the second half. The net debt/EBITDA ratio is also evolving favorably, falling to 12.1x (from 12.3x at end 2023).

The debt has an average maturity of 4.9 years (stable compared to end-2023) and retains strong protection against rising interest rates: the hedging ratio is 95%, with the average maturity of hedging instruments extended to 6.1 years. The average interest rate on Covivio's debt is 1.68% and is expected to remain below 2.5% until end of 2028.  

On 7 May 2024, Standard & Poor's confirmed its BBB+ rating with a stable outlook on Covivio.

Revenues up +6.5% on a like-for-like basis

In the first six months of 2024, revenues came to €500 million and €327 million Group share, up +2% year-onyear on a like-for-like basis. The impact of office disposals was more than offset by the reinforcement in hotels and positive operating momentum across the three asset classes. On a like-for-like basis, revenues rose by +6.5%, thanks to indexation (3.1 pts), higher occupancy and rents on re-letting and renewals (2.9 pts) and variable revenues in hotels (0.6 pt).

In hotels, revenues continued to grow, up +5.2% on a like-for-like basis. This performance was driven by both fixed rents, up +4.4%, and variable revenues, up +6.1%. As reported, revenues rose by +15.1%, benefiting in the second quarter from the increased stake in Covivio Hotels.

In offices, Covivio's premium approach (centrality, sustainability, and top-level service offering) is bearing fruit in the face of increasing polarization in the rental market. Rents fell by -4.5% at current scope, due to disposals in 2023 and 2024, but rose strongly on a like-for-like basis, by +8.8%, driven mainly by indexation (4.4 pts), the rebound in the occupancy rate (+3.8 pts) and positive reversion (+0.6 pt).  

In German residential, like-for-like rental growth remained strong at 3.9%. This was mostly driven by indexation (for 1.7 pt), modernization programs (for 1.3 pt) and re-lettings (for 1.1 pt), with high reversion (+22%, including +35% in Berlin). The occupancy rate remained high at 99%. 

The average occupancy rate for the portfolio rose by 40bps to 97.1% (vs. 96.7% at end 2023), while the average firm lease term was 6.8 years. 

Portfolio value up +2% at current scope and stabilizing on a like-for-like basis

Real estate investment market remained sluggish in the first quarter of 2024 across most asset classes, except for hotels. Since the second quarter, there have been more positive signs. Transaction volumes increased in hotels, while large transactions have made a comeback in German residential, and prime offices are currently trading at around 4% yields.

Against this backdrop, Covivio's portfolio grew by +2% on at current scope, to €15.4 billion Group share (€23.0 billion at 100%), the reinforcement in hotels largely offsetting office disposals.

On a like-for-like basis, asset values changed by -1.3%, with Paris and Milan offices stabilizing and hotels and Berlin residential growing.

In hotels, driven by revenue growth, portfolio rose slightly by +0.5% on a like-for-like basis, with slight growth in France (+1.1%) and Southern Europe (+1.3%), while Germany was the exception, at -0.7%. The portfolio has an average yield of 6.0%.

In offices (-2.6% on a like-for-like basis), values in France and Italy were broadly stable (-1.2%), driven by the performances of Paris CBD (+2.0%) and Milan (-0.8%). In Germany, values are continuing to adjust, down by -10% over the first half of the year, due to a particularly sluggish investment market and a lower top-end yield (2.5% office prime yield in Berlin in mid-2022, vs. 2.7% in Paris and 3% in Milan). The average yield on offices rose by +20bps to 5.7%.

Lastly, the German residential portfolio shows stable values on a like-for-like basis (-0.1%), with increases in the best locations (+2.3% in Berlin, accounting for 57% of the portfolio). The average residential portfolio value was €2,435/m², including €3,081/m² in Berlin and €1,776/m² in North Rhine-Westphalia, and the average yield rose by 10bps over six months to 4.2%. The portfolio is valued at block. However, 49% of the portfolio, i.e. €2.3 billion, is already divided into condominiums, particularly in Berlin (68% / €1.9 billion), where the gap between block value and unit by unit selling price has reached +50%.

At 30 June 2024, the average yield on Covivio's portfolio was 5.3%, up +20bps over six months. 

Growth in recurring net profit against a backdrop of debt reduction

Recurring net profit of €231 million, up +3% year-on-year 

Solid like-for-like revenue growth, tight control of operating costs and lower financial expenses enabled recurring net result (adjusted EPRA Earnings) to rise by +3.3% year-on-year to €230.8 million (€2.24 per share, down -4.8% due to the increase in the average number of shares). 

Covivio's net profit was close to zero, at - €8 million, with the slight drop in values largely offset by recurring result.

EPRA NTA at €77.7/share

EPRA Net Tangible Asset (EPRA NTA) came at €8,662 million, up +2.3% over six months, with issued shares to acquire stake in Covivio Hotels more than offsetting the moderate like-for-like value change. On a per-share basis, it came at €77.7, down -7.5%, due to the increased number of shares following the subscription by 77.5% of shareholders to the scrip dividend. EPRA Net Disposal Value (EPRA NDV) came at €77.8 per share (€8,668 million) and EPRA Net Reinvestment Value (EPRA NRV) was €9,511 million and €85.4 per share.

ESG strategy continues to bear fruit

Continued increase in certification rate, now at 96% 

Covivio has continued to increase its portfolio certification rate: the proportion benefiting from HQE, BREEAM, LEED or equivalent certification, in operation and/or under construction, now stands at 95.9% (+0.6 pt vs. 2023).

In addition, the proportion of office buildings with the highest levels of certification (Very Good and above) stands at 68.9%, up +1.7 pt compared to end-2023.

This strategy of environmental improvement across the entire portfolio is actively contributing to the achievement of the Group's ESG ambitions, in particular its commitment to reduce its greenhouse gas emissions by 40% between 2010 and 2030 (across all scopes 1, 2 and 3 and the entire life cycle of assets: materials, construction, restructuring and operation). 

Growth in ESG ratings in the first half of the year 

In early February 2024, Covivio was recognised by the Carbon Disclosure Project (CDP) for its leadership in terms of transparency and performance on climate change, with an "A" rating, the highest possible, Covivio is one of only 1.6% of companies to have achieved an 'A' rating, out of more than 20,000 companies assessed.

In June 2024, Sustainalytics improved Covivio's rating by 3 points to '4.8' (from 7.9 previously), assessing its level of ESG risk as 'negligible' and placing it in the sector's 'Top 5' and the ‘Top 20' worldwide.

Increase in the proportion of debt linked with ESG objectives 

A pioneer in the issuance of green bonds since 2016, Covivio has continued to increase the weight of its green debt (associated with ESG objectives) to 61% at end-June 2024 (from 57% at the end of 2023 and 38% at end of 2022).

2024 outlook

Guidance raised for 2024 recurring net result 

The strengthening of its position in Covivio Hotels and its solid operating performance in the office sector have enabled the Group to raise 2024 recurring net result guidance (adjusted EPRA Earnings) to around €460 million (from €440 million initial guidance), up +6% vs. 2023.

The Group is also aiming to return to a full cash dividend payment for 2024, with a payout ratio of over 80%.

Further reinforcement in hotels and extraction of growth potential 

In the medium term, Covivio's priorities are (i) to continue strengthening its hotel portfolio and (ii) to unlock the growth potential of its assets, particularly in Paris, Milan and Berlin.

In addition to the favorable outlook for the hotel market, the strengthening of the portfolio into hotels in the first half of the year and the ongoing asset management operations represent more than €50 million (Group share) in additional hotel revenues. In particular, the asset swap with AccorInvest should generate €10 million in additional revenues, to which will be added revenues from identified capex programs (around €75 million and close to 20% return on investment). Finally, Covivio plans to convert some office buildings into hotels. Two projects have already been identified, in Paris and Boulogne, involving investment of almost €90 million and additional revenue of €7 million.

As a major player in the major European capitals of Paris, Milan and Berlin, Covivio also intends to continue extracting value from its assets by accompanying the transformation of these cities:

•       in Paris, Covivio owns 11 office buildings from the portfolio historically leased to Orange. The gradual release of these assets between now and 2030 will enable them to be transformed into prime offices or hotels and significantly increase their revenue, with a potential of more than €60 million from €30 million currently.

•       in Milan, Covivio has the capacity to develop almost 100,000 m² of mixed-use assets at Symbiosis and near to the future Olympic Village at Scalo di Porta Romana, with the potential to generate €45 million in revenue.

•       in Berlin, Covivio is a major player in the residential sector, where the imbalance between supply and demand continues to increase, underpinning long-term rental growth. The latest market index (Mietspiegel) published at the end of May showed a year-on-year increase of +7.4% for Covivio locations. In this market, Covivio has one of the most prime portfolios, with significant potential through uplift on relettings (+35%), value improvement via privatizations (with a margin of more than +50%), and modernization programs (average return of 5% to 10%). Covivio is also active in the renewal of the city center and will deliver its mixed-use project on Alexanderplatz in 2027.  

  AGENDA

          ► Q3 2024 Activity:                                                                                    22 October 2024

          ► Capital Markets Day 2024 (Paris):                                                          28 November 2024

  CONTACTS

                                  Press Relations                                                 Investor Relations

                                Géraldine Lemoine                                                   Vladimir Minot

Tel: + 33 (0)1 58 97 51 00   Tel: + 33 (0)1 58 97 51 94 geraldine.lemoine@covivio.fr             vladimir.minot@covivio.fr            

Louise-Marie Guinet

Tel: + 33 (0)1 43 26 73 56 covivio@wellcom.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 €23.0 bn 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), 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, CAC SBT 1.5°C, DJSI World & Europe, Euronext Vigeo (World 120, Eurozone 120, Europe 120 and France 20), Euronext® CDP Environment France EW, ISS ESG, Ethibel and Gaïa ethical indices and also holds the following awards and ratings: CDP (A), GRESB (90/100, 5-Star, 100% public disclosure), ISS-ESG (B-) and MSCI (AAA).

Notations solicited:

Financial part:               BBB+ / Stable outlook by Standard and Poor’s

1.  BUSINESS ANALYSIS                12

2.  BUSINESS ANALYSIS BY SEGMENT         21

A. OFFICES                  21 B. GERMAN RESIDENTIAL                30 C. HOTELS              36

3.  FINANCIAL INFORMATION                 41

4.  FINANCIAL RESOURCES                   50

5.  EPRA REPORTING          55

6.  FINANCIAL INDICATORS                    65

7.  GLOSSARY              66

1. BUSINESS ANALYSIS

A. REVENUES: €500 MILLION AND €327 MILLION GROUP SHARE IN H1 2024

1: Like-for-like change || 2: Operating Properties (EBITDA)

Group share revenues, up +1.8% at current scope, stand at €326.8 million vs. €321.2 million in H1 2023, due to:

„  The reinforcement of the stake in Covivio Hotels (+€8 million); „ The +6.5% increase on like-for-like basis, split between:

o    Offices: +8.8% like-for-like, driven by indexation and letting activity; o Hotels: a sustained like-for-like revenue increased by +5.2%, due to the continued rebound in variable revenues (EBITDA + variable leases) of +6.1% and a +4.4% like-for-like growth for fixed lease properties;

o    German Residential: a continued robust growth of +3.9% like-for-like.

„  Reduction in office exposure through disposals (-€14 million);

„  Deliveries of new assets (+€2 million), in Greater Paris and Berlin; 

„  Vacated assets for redevelopment (-€5 million), mostly in Paris Western Crescent and first ring, for conversion into residential or hotel.     

B. LEASE EXPIRIES AND OCCUPANCY RATES 

1. Lease expiries: average firm residual duration of 6.8 years 

Average lease duration by activity 

                                                      By lease end date                                By lease end date

(1st break)

Lease expiries schedule

In 2024, lease expiries with first break options represent €25 million, of which €18.0 million are already managed (€3.6 million of hotels, €11.7 million of offices for which tenant has no intention to vacate the property and €2.7 million of offices to be converted into hotels). Only €7.0 million (1.0% of Annualized revenue) are still to be managed in offices, mostly on core assets for which tenant decision is not known yet. 

2. Occupancy rate: 97.1% secured, +0.4pt vs. 2023

                                                                      Occupancy rate (%)

The occupancy rate continued to increase, by +40bps over six months, to 97.1% for the whole portfolio. This is linked with the rebound in offices by +60bps to 95.1%, thanks to several lettings in Greater Paris. 

C. BREAKDOWN OF ANNUALIZED REVENUES

                                         By major tenants                                                                  By activity

7%

D. STABLE COST TO REVENUE RATIO

¹Ratio restated of IFRIC21 impact (property tax), spread over the year

E. DISPOSALS: €311M OF NEW AGREEMENTS 

1: GS: Group share

New disposals and agreements totalled €311 million Group share (€455 million at 100%) at the end of the semester. 

These disposal agreements were made of offices for the largest part, for a total of €142 million Group share, with an average margin of -1.6%. It dealt with 12 offices in France and 9 offices in Italy (mostly from the Telecom portfolio, in regions). 

In German residential, €129 million Group share (€189 million at 100%) of disposal agreements were achieved over H1, with an average premium of +5.6% vs. 2023 book values. Major achievements were the creation of a joint venture with CDC Investment on a portfolio in Berlin, in line with the values at the end of 2023, contributing €93m (Group share) to the disposal program, and, at the same time, the Group continued with its privatisation program, selling €25m Group share (€38m at 100%), at an average premium of 40%. 

In the hotels business, disposal agreements totalled €40m Group share (€83m at 100%), at an average premium of +10.7% to appraised values. These mainly concerned non-strategic hotels in Germany and Spain, as well as joint disposals (opco and propco) in France with AccorInvest.

INVESTMENTS: €214M GROUP SHARE REALIZED 

€214 million Group share (€263 million at 100%) of capex were realized during the first 6 months of the year to improve the quality of our portfolio and create value:       

„  Capex in the development pipeline totalled €110 million Group share (€125 million at 100%),

„  €71 million Group share (€100 million at 100%) relate to works on the operating portfolio (including 2/3 of valorisation work), of which €35 million in German residential (54% for modernization capex, generating additional revenue),

„  €33 million capex on office to residential conversion projects (built to sell).

F. DEVELOPMENT PROJECTS:

1. Committed office pipeline: €93m of revenues in Group share, 85% in city centers 

Covivio has an office pipeline of 10 buildings which will generate €93m of revenues in France, Germany, and Italy, the bulk of it (85%) in the city centers of Paris, Milan and Berlin, where demand for prime assets is high. Capex still to be spent on the committed development pipeline reach €584 million (€167 million per year by 2027 on average).

This pipeline is highly pre-let (55%, +2 pts compared to end-2023) and will participate to the continued improvement of the portfolio quality towards centrality & grade A buildings (100% of the projects certified “Excellent” or above).  

„  Expected deliveries before year-end 2024: 2 projects in Milan (The Sign D, Rozzano).

„  Deliveries from 2025 refer to 8 projects in Paris CBD (Grands Boulevards, Monceau), Paris 1st ring (turnkey development for Thalès), Milan (Corte Italia, Symbiosis G+H), Berlin (Loft), Düsseldorf (Icon) and Berlin (Alexanderplatz). 

1. Business analysis - Group share 

2024 half-year results

¹  Surface at 100%

²  Including land and financial costs

³  Yield on total rents over total budget 

17

2. Build-to-sell pipeline 

Total 

                                                                                                                             Total                               1

                                                                                                                                    ¹                         Budget                   Pre-sold

     Committed projects                                                      Units                 Budget 

_(€m, 100%)                      (€m, Group   (%) share)

     Berlin (1 project)                                                                  92                                                                                                

     Berlin (2 projects)                                                               117                                                                                                

¹ Including land and financial costs

„  At the end of June 2024, the German build-to-sell pipeline deals with 3 projects located in Berlin, where housing shortage is the highest in Germany, totalling 209 residential units and a total cost of €73 million Group share.

„  The current French pipeline is composed of 6 projects located mainly in the Greater Paris and Bordeaux, representing 804 residential units, a total cost of €152 million Group Share. 94% of the projects are already presold. 

„  The total margin of the committed pipeline reaches 8%.

3. Managed Pipeline

In the long-term, Covivio also owns more than 293,000 m² of landbanks that could welcome new development projects:

► in Paris, Greater Paris and Major French Cities (180,000 m²) mainly for turnkey developments;

► in Milan with Symbiosis (23,000 m²) and Porta Romana (76,000 m²); ► and approximately 14,000 m² in Germany, mostly in Berlin.

2024 half-year results

G. PORTFOLIO

Portfolio value: +2.0% at current scope, -1.3% like-for-like change

¹ LfL: Like-for-Like                                                                                                                                                                               

The portfolio increased by +2% at current scope, to reach €15.4 billion Group share (€23.0 billion at 100%). This is mostly explained by the reinforcement in hotels, offsetting the impact of disposals in offices.

On a like-for-like basis, the portfolio value changed by -1.3% mostly due to: 

„  Overall in offices, asset values were down -2.6% on a like-for-like basis, with substantial disparities linked to centrality and geography. France and Italy (85% of office portfolio value) displayed almost stable values (of which +2% in Paris CBD), while Germany values (15% of office portfolio value) continued to adjust (-10% over H1);

„  Germany Residential values stabilized in H1 (-0.1%) on a like-for-like basis. A stronger performance was achieved in Berlin (57% of German residential portfolio), at +2.3% like-for-like. Average value per m² for residential part of the portfolio is €2,435/m², of which €3,081/m² in Berlin. Assets are valued at their block value.

49% of the portfolio, worth €2.3 billion, is already divided into condominium, particularly in Berlin (68%; €1.9 billion), where the unit sale value is 50% above the block value.

„  In Hotels, portfolio values increased slightly (+0.5%), of which +0.6% for fixed leases and stable values for operating properties. 

Geographical breakdown of the portfolio at end of H1 2024

                                                                                                                                                                          19

H. LIST OF MAIN ASSETS

The value of the ten main assets (excl. Dassault Systèmes Campus & Thalès Campus) represents 14% of the portfolio Group share, stable vs end 2023.

2024 half-year results

2. BUSINESS ANALYSIS BY SEGMENT 

A. OFFICES: 50% OF COVIVIO’S PORTFOLIO

Covivio has implemented an overall offices strategy based on centrality, hospitality, and sustainability. This strategy has been executed by increasing investments on best-in-class assets in central locations, improving the quality of the existing portfolio and exiting from non-core areas.

Today, quality has become a much more important driver of future growth for Covivio, which owns offices with high levels of centrality and accessibility, A-quality buildings, and top-level service offering. These offices buildings are located in

France (27% of Covivio’s portfolio), Italy (16%), and Germany (7%) totalling €9.3 billion (€7.7 billion Group share) as of end-June 2024.

This offices strategy is bearing fruit, as illustrated by the increase in occupancy rate in 2024, by +60bps to 95.1%.  

Covivio's portfolio is split as follows:

and the WALB (3.8 years) are lower, with a disposal or conversion into residential strategy. 

1. European office market: confirmed polarization, slowdown in investments¹

        1.1.      French offices: stabilizing take-up and yields  

Take-up in Greater Paris office market reached 853,400 m² in H1 2024, down -5.1% year-on-year. At the same time, customer demand continues to polarize, as the preference for best places continues to increase: 

► Paris inner city outperformed, with take-up up +12.2% year-on-year to 428,900m². 

► Paris inner city counted for 47% of the total take-up in Greater Paris (vs. 40% on average over the last 5 years).

The immediate offer increased by +5% over the last six months to 4.98 million m² and the vacancy rate now stands at 9.0%, up by +30bps year-to-date, but with strong disparities: below 3% in Paris CBD and close to 15% in the first ring and La Défense. 

Scarcity of best assets in city centers continues to impact positively prime rents, reaching all-time levels in Paris at €1,070/m²/year (+7% yoy), and with transactions currently under marketing at €1,200/m²/year. Incentives in Greater Paris increased slightly to 26.0% in H1 2024, up +50bps vs. end-2023, with maintained disparities across sub-markets, from 13.1% in Paris North-East to 42.8% in La Défense. 

¹ Sources: Immostat, JLL, Cushman & Wakefield, Savills, BNP Real Estate, DILS

                                                                                                                                                                          21

Office investments in Greater Paris totaled €985 million over H1 2024, down –65% YoY. Prime yields remained stable over the first semester, at 4.25% in Paris CBD. Mood in the investment market seems improving over the last weeks, looking at the increased number of transactions under negotiations (of which > €500m at yields around 4%).

        1.2.      Milan offices: dynamic letting market and better investment market 

Milan office market recorded a total take-up of 185,000 m² in H1 2024, -9% year-on-year. Demand is still focused on buildings in prime locations, offering good level of services, as demonstrated by the level of grade A/A+ properties, which count for 80% of the total take-up in Milan.

The average vacancy rate in Milan was up by +10bps in Q1 2024, to +11.3%, with strong disparity between the centre (where most of Covivio’s portfolio is located), at 6.7% and the periphery.

The intense demand for high-quality spaces, combined with the scarcity of grade A assets, contributed to a new increase of prime rents in Milan, at €750/m²/year (+7% year-on-year), according to DILS.

With a total amount of €830 million invested in H1 2024, the Italian office investment market rebounded strongly compared to last year (€400 million). Prime yields stabilized, at 4.25% according to BNP Real Estate.

        1.3.      Germany offices: +4.5% in take-up, prime rents up +5% yoy on average

Take-up in Germany top six markets in H1 2024 increased by +4.5% year-on-year to 1,164,000 m², boosted by Dusseldorf (+33%), Munich (+17.5%) and Berlin (+11%).  

Vacancy rates reached 5.9% on average, up +30 bps over six months. Hamburg (4.2%) and Berlin (5.2%) recorded among the lowest vacancy rates, followed by Munich at 5.8%, while in Frankfurt and Dusseldorf vacancy levels remained higher, respectively at 10% and 7.8%. 

Prime rents grew on average by +5.1% vs. H1 2023, with varying performances: strong growth in Düsseldorf and Munich (+11%), +2% in Frankfurt and stable in Berlin.

Investment volumes in German Offices declined by -22% YoY in H1 2024 to €1.6 billion. Prime yields stabilized since end-2023, at 4.4% on average for the top 6 cities in Germany (of which 4.25% in Berlin and Hamburg, 4.5% in Frankfurt and Dusseldorf). 

2. Accounted revenues: +8.8% on a Like-for-Like basis

                                                                 100%                                                   Group share                               

1 LfL: Like-for-Like

Compared to last year, rental income decreased by -€7.4 million, mainly due to: 

„  Strong like-for-Like rental growth (+€12.1 million) of +8.8%, a very good performance mostly driven by the impact of strong indexation (+4.4pts contribution) and letting activity,

„  Disposals (-€13.2 million) realized in 2023 (-€7.2 million) and in 2024 (-€6.0 million),

„  Impact of vacated assets to be converted into hotel or residential (-€5.1 million) partially offset by deliveries of new assets (+€2.2 million),

„  Some base effects with 2023 indemnities (-€3.3 million compared to 2023).

3. Annualized revenue

4. Indexation

Fixed-indexed leases are indexed to benchmark indices (ILC and ICC in France and the consumer price index for foreign assets) :

„  For current leases in France, 93% of rental income is indexed to ILAT, 5% to ICC and 2% to ILC.

„  In Italy, the indexation of rental income is usually calculated by applying the increase in the Consumer Price Index (CPI) on each anniversary of the signing of the agreement. 

„  Rents are indexed on the German consumer price index for 42% of leases, 10% have a fixed uplift and 32% have an indexation clause (if CPI goes above an annual increase between 5% and 10%). The remainder (16%) is not indexed and mainly let to public administration.

5. Busy rental activity: 74,079 m² renewed or let during 2024

2024 was a dynamic semester for letting activity, with 74,079 m² let or renewed, with the main lettings shown below:

„  27,225 m² have been let or pre-let in 2024, of which: 

o    3,661 m² on Paris, The Line, o 3,085 m² on Sun in Munich, o         3,009 m² of pre-lettings on the development part of Dusseldorf, Icon, o            2,664 m² on Levallois, Maslo, now 100% let, o         2,817 m² of pre-lettings on the development portfolio (Rozzano), o         2,184 m² on Orly, CDO Belaïa, o      1,766 m² on Issy les Moulineaux, Urban Garden now 84% let, o             1,502 m² on Frankfurt, FAC, o          1,438 m² on Fischerinsel in Berlin,  o         1,270 m² on Chatillon, IRO, now 69% let.

„  46,854 m² have been renewed, of which:

o    30,234 m² on Milan, Lorenteggio, o          7,870 m² on Orly, CDO Askia, o      4,320 m² on Dusseldorf, Icon,  o       1,270 m² on Hamburg, Zeughaus.

„  29,297 m² were vacated, mostly in France (21,705 m²) and Germany (6,361 m²) o 13,612 m² for redevelopment (€1.5 million of top up rents, Group share), mostly for new offices in Chalonsur-Saone and Melun.

o    15,685 m² on assets to be relet, of which 4,554 m² have already been relet.

6. Lease expiries and occupancy rate

6.1. Lease expiries: firm residual lease term of 5.0 years

In 2024, €21.5 million of leases will expire, of which €14.4 million already managed (€11.7 million for which tenant has no intention to vacate the property and €2.7m on assets going to be transformed into hotels). €7.0 million are still to be managed (1.0% of Covivio annualized revenues), mostly on core assets for which tenant decision is not known yet. 

6.2. Occupancy rate: 95.1% at end June-2024, +60 bps vs end-2023

„  In France, the occupancy rate increased by +90bps to 95.0%, compared to 94.1% at end-2023, mostly due to the dynamic letting activity in H1 2024.

„  In Italy, the occupancy rate level decreased by -10bps to 98.6%, compared to 98.7% at end-2023, mainly due to disposals of fully occupied assets (Telecom portfolio), almost fully offset by letting activity.

„  In Germany, the occupancy rate increased by +130 bps to 87.7% vs. end-2023. This is mainly linked to lettings, especially on Sun in Munich.           

7. Portfolio values

7.1. Change in portfolio values: -1.3% on offices 

The portfolio value decreased by - €98 million since year-end-2023 (-1.3%), mainly driven by:

„  - €207 million from changes in values,

„  + €138 million invested in development projects and upgrading works on assets in operation, „ - €64 million from disposals.

7.2. Change on a like-for-like basis: -2.6%

        ¹        LfL : Like-for-Like || ²  Yield excluding assets under development

The -2.6% change in Like-for-Like value is driven by several effects: 

„ Strong resilience of France (-1.4%) and Italy (-1.0%) assets, especially in city centers with values back to stability, while some further limited adjustments were needed outside city centers, „ -10% value decline in Germany, in line with a more muted investment market in H1.

The average yield increased by +20bps to 5.7%.

8. Assets partially owned

Partially owned assets are the following:

-    CB 21 Tower (75% owned) in La Défense.

-    The Silex 1 and 2 assets in Lyon (50.1% owned and fully consolidated).

-    So Pop project in Paris Saint-Ouen (50.1% owned and fully consolidated).

-    Streambuilding project in Paris 17^th (50% owned and fully consolidated).

-    The Dassault campuses in Vélizy (50.1% owned and fully consolidated).

-    The New Vélizy campus for Thales (50.1% owned and accounted for under the equity method).

-    Euromed Centre in Marseille (50% owned and accounted for under the equity method).

-    Coeur d’Orly in Greater Paris (50% owned and accounted for under the equity method).

 2. Business analysis - Group share German residential – 2024 half-year results

B. GERMAN RESIDENTIAL: 30% OF COVIVIO PORTFOLIO 

Covivio operates in the German residential segment through its 61.7% held subsidiary Covivio Immobilien. The figures presented are expressed as 100% and as Covivio Group share.

Covivio owns around ~41,100 units in Berlin, Hamburg, Dresden, Leipzig, and North Rhine-Westphalia, representing €7.2 billion (€4.5 billion Group share) of assets. 

Covivio is mostly exposed to A-cities in Germany, with a 100% exposure to metropolitan areas above 1 million inhabitants and 90% in cities above 500,000 inhabitants. Covivio targets the high-end of the housing market. 

Exposure to Berlin, where housing shortage is the highest in Germany, represents 57% at end-June 2024. Covivio’s portfolio in Berlin is of high quality, with 68% of buildings built before 1950 and 68% of the surface already divided into condominiums.

1. Continued rise in markets rents and rebounding investment market 

„  In Germany, the demand for housing continued to rise since the start of the year, in a context of increasing number of inhabitants (population in Germany reached a record high level of 84.7 million inhabitants according to Destatis), while building completions, at 294 000 units in 2023, remained far from the Government target (> 400 000 units / year). 

„  This shortage continues to support rents in Germany and especially in Berlin. According to Immoscout24, in H1

2024, average asking rents for existing buildings were by +4.2% to €8.56/m²/month in Germany and by +7.2% to €13.8/m²/month in Berlin. For new buildings, rents were up up by +8.7% year-on-year in Germany to

€12.2/m²/month and by +8.6% in Berlin to €19.5/m².

„  After several low quarters for the German residential investment market (for multi-family buildings above 30 units), volumes rebounded in H1 2024, by +25% to €3.3 billion according to BNP Real Estate. The private market also shows signs of stronger appetite since the beginning of 2024, as shown by private real estate loans recorded by the Bundesbank, up +15% year-on-year to €76.5 billion over the first 5 months of 2024.

„  Average asking prices were also trending upwards in Q1 2024. According to Immoscout24, prices for existing buildings increased by +2% over H1 in Berlin to €4,641/m² (-0.1% over one year), still well above the current valuation of Covivio’s residential portfolio (€3,081/m² in Berlin). The average square meter price for new buildings also increased to €6,471/m² in H1 2024 (+3.1% over H1 and +5.1% over one year). 

In H1 2024, Covivio's activities were marked by:

„  Continued high rental growth: +3.9% on a like-for-life basis, now well above inflation;  

„  Creation of a joint-venture on a €274 million Berlin portfolio, through a partnership with CDC Investissement Immobilier;  

„  Stability in values: -0.1% on a 6-months like-for-like basis, of which +2.3% in Berlin.

2. Accounted rental income: +3.9% like-for-like  

of which Residential  121.4 78.4 125.5 81.0 +  3.4% +4.0%  85% of which Other commercial ²  20.5 13.4 21.1 13.8 +  3.0% +3.8%  15%

1 LfL: Like-for-Like || 2 Other commercial: Ground-floor retail, car parks, etc

Rental income amounted to €94.8 million Group share in H1 2024, up +3.3% (+€3.0 million) thanks to:

„  In Berlin, like-for-like rental growth is +4.5% (+€ 2.8 million), driven by the indexation (+1.7 pts) and relettings (+1.4 pts) with high uplift (+35% in H1 2024).

„  Outside Berlin, like-for-like rental growth was strong in all areas (+3.4% on average, +€2.2 million) due to the reletting impact (including modernizations) and the indexation.

„  These effects were partly offset by disposals closed in 2023/2024 (-€0.8 million).

3. Annualized rents: €190.4 million Group share

                                                         2,592,367                 39,560                  256.2                         163.1

                                                           233,628                  1,532                    43.8                           27.2

¹ Other commercial: Ground-floor retail, car parks, etc || 2 North Rhine-Westphalia

Rental income (€8.8/m²/month on average) offers solid growth potential through reversion vs. our achieved reletting rents in all our markets including Berlin (30%-35%), Hamburg (10%-15%), Dresden and Leipzig (10%-15%) and in North RhineWestphalia (15%-20%).

4. Indexation 

Rental income from residential property in Germany changes depending on multiple mechanisms.

4.1. Rents for re-leased properties:

In principle, rents may be increased freely, provided the property is not financed through governmental subsidies. 

As an exception to the unrestricted rent setting principle, cities like Berlin, Hamburg, Cologne, Düsseldorf, Dresden and Leipzig have introduced rent caps (Mietpreisbremse) for re-leased properties. In these cities, rents for re-leased properties cannot exceed the public rent reference (Mietspiegel) by more than 10%, except in the following conditions: 

„  If the property has been modernised in the past three years, the rent for the re-let property may exceed the +10% limit by a maximum of 8% of the costs to modernise it.

„  In the event the property is completely modernised (work amounting to more than one-third of new construction costs excl. Maintenance), the rent may be increased freely.

„  If the rent received from the previous tenant is higher than the +10% limit, then the previous rent will be the limit in the case of re-letting.

Properties built after 1 October 2014 are not included in the rent cap.

4.2.  For current leases:

For residential tenants, the rent can generally be adjusted based on the local comparative rent (Mietspiegel), which is usually determined based on the rent index. In addition to this adjustment method, an index-linked or graduated rent agreement can also be concluded. A successive combination of adjustment methods can also be contractually agreed (e.g. graduated rent for the first 5 years of the contract, followed by adjustment to the local comparative rent).

Adjustment to the local comparative rent: The current rent can be increased by 15% to 20% within three years, depending on the region, without exceeding the local comparative rent (Mietspiegel). This type of contract represents c. 90% of our rental income.

4.3.  For current leases with work carried out:

If works have been carried out, rents may be increased by up to 8% of the cost of work excl. maintenance, in addition to the possible increase according to the rent index. This increase is subject to three conditions:

„  The works aim to save energy, increase the utility value, or improve the living conditions in the long run. „ The rent increase takes effect 3 months after the declaration of rent increase.

„  The rent may not be increased by more than €3/m² for work to modernise the property within a six-year period (€2/m² if the initial rent is below €7/m²).

5. Occupancy rate: a high level of 99.0%

The occupancy rate stands at 99.0% It has remained above 98% since the end of 2015 and reflects the Group's very high-quality portfolio and low rental risk.

6. Portfolio values: €7.2 billion (€4.5 billion Group share)

6.1. Change in portfolio value: -2.8%

In the first half of 2024, the portfolio decreased by -2.8% at current scope, to €4.5 billion Group share, mostly driven by the creation of a joint-venture, contributing to €93 million of disposals Group share.

6.2. Stable values on a like-for-like basis: -0.1% 

1 LfL: Like-for-Like 6 months || 2 Other commercial: Ground-floor retail, car parks, etc || 3 NRW: North Rhine-Westphalia

The average value of residential assets is €2,551/m², with €3,208/m² in Berlin (€3,081 on pure residential) and €1,776/m² in North Rhine-Westphalia. The average yield increased by +10 bps vs. end of 2023 to 4.2%. Assets are valued at their block value. 49% of the portfolio is already divided into condominiums, particularly in Berlin (68%), where the unit sale value is 50% above the block value.

In H1 2024, values decreased –0.1% on a like-for-like basis versus end-2023, reflecting a renewed appetite for large portfolios in German residential.

7. Maintenance and modernization CAPEX

In half-year 2024, CAPEX totalled €54.7 million (€19.4 /m²; €34.7 million in Group share) and OPEX came to €9.8 million (€3.5 /m²; €6.2 million in Group share).

On average, modernization projects, which totalled €29.4 million in H1 2024 (€18.8 million in Group share), have an immediate yield around 5%, going up to 10% post relettings.

                                                                                        North Rhine -Westphalia                                                                                                Berlin - €23.3m (€ 17.8 / m²)   

                                                                                                                                                 € 9.6 / m² modernization                      

                              €19.2m (€ 17.4 / m²)                                                                                                    € 8.2 / m² maintenance                  

                              € 9.3 / m² modernization                                                                                                                                                        

                              € 8.0 / m²   maintenance                                                                                                                             

                                  Hamburg   - €7.5 m (€ 50.0 / m²)                                                                                                                      

                € 26.9 / m² modernization                                                                                                 € 23.1 / m² maintenance                                                 Dresden & Leipzig             - €4.8m (€ 17.9 / m²)                            

                                                                                                                      € 9.6 / m² modernization                                                 

                                                                                                                     _{€ 8.3 / m² maintenance}                                                   

C. HOTELS: 20% OF COVIVIO’S PORTFOLIO 

Covivio Hotels, a 52.5%-owned subsidiary of Covivio as of 30 June 2024 (vs. 43.9% at end-2023), is a listed property investment company (SIIC) and leading hotel real-estate player in Europe. It invests both in hotels under lease (fixed or variable) and in hotel operating companies.

The figures presented are expressed at 100% and in Covivio Group share (GS).

Covivio owns a high-quality hotel portfolio (311 hotels, 43,402 rooms) worth €6.4 billion (€3.1 billion in Group share), focused on major European cities and let or operated by major hotel operators such as Accor, B&B, Mariott, IHG, NH Hotels, etc. This portfolio offers geographic and tenant diversification (across 12 European countries) as well as several asset management opportunities via different ownership methods (hotel lease and hotel operating properties).

1. Hotels market: continued increasing performances 

European hotels performance in the first half of the year is increasing compared to 2023. The average RevPAR (revenue Per Available Room) in Europe shows an average increase of +4% year-on-year at end-May 2024, as the market continues its positive momentum, supported by the rise in occupancy rates and average prices. 

„  Southern European countries, particularly Spain and Italy, are showing very strong performances, increasing respectively by +15% and +8%.

„  Germany is continuing to catch up with a RevPAR growth of +4%. 

„  In France, RevPAR growth is more modest at +1%, impacted by travel delays during the pre-Olympic period. 

„  On the investment side, volumes remained strong, reaching €4.5 billion in Q1 2024, +45% vs. Q1 2023. France, Spain, and the United Kingdom account for the majority of transactions (60%). 

Assets partially owned by Covivio Hotels include mostly: 

•       91 B&B assets in France, including 89 held at 50.2% and 2 held at 31.2%

•       25 AccorInvest assets in France (23 assets) and Belgium (2 assets), between 31.2% and 33.3% owned.

2. Accounted revenues: +5.2% on a like-for-like basis 

¹ LfL: Like-for-Like                                                                                                                                                                

Hotel revenues increased by +5.2% like-for-like (+€10.0million Group share) compared to H1 2023, due to:

„  Lease properties:

•       Variable leases (23% of hotels revenue), up +9.3% on a like-for-like basis, mostly linked with the steep increase of variable rents in the south of Europe, compensating a slowdown in Paris area impacted by the pre-Olympic period.

•       Fixed leases (57% of hotels revenue), up +4.4% like-for-like, mostly through positive indexation.

„  Operating properties (20% of hotels revenue): mainly located in Germany and in the north of France. The +2.9% like-for-like increase in EBITDA is mostly explained by improved performances in Germany (+10%). 

3. Annualized revenue

Breakdown by operators and by country (based on 2024 revenues), totalling €178.8 million in Group share:

Revenues are split using the following breakdown: fixed (55%), variable (22%) and EBITDA on management contracts (23%).

4. Indexation

Fixed leases are indexed to benchmark indices (ILC and ICC in France and consumer price index for foreign assets).

5. Lease expiries: 11.8 years hotels residual lease term

6. Portfolio values: +21% at current scope

6.1. Change in portfolio values 

At the end of June 2024, the portfolio reached €3.1 billion (Group share), reflecting a €527 million increase (+21%) compared to year-end 2023. This growth can be attributed primarily to the increased stake in Covivio Hotels (from 43.9% to 52.5%), a significant step for Covivio in enhancing its presence in the hotel industry, along with a positive change in value amounting to €13 million.

6.2. Change on a like-for-like basis: +0.5%

At the end of June 2024, Covivio held a unique hotel portfolio (311 hotels / 43,402 rooms) of €3.1 billion group share (€6.4 billion at 100%) in Europe. This strategic portfolio is characterised by:

„  High-quality locations: average Booking.com location grade of 8.9/10 and 90% in major European city destinations.

„  Diversified portfolio: in terms of countries (12 countries, none representing more than 33% of the total portfolio), and segment (68% economic/midscale and 32% upscale).

„  Major hotel operators with long-term leases: 16 hotel operators with an average lease duration of 11.8 years.

The portfolio value increase by +0.5% like-for-like:

-          On a like-for-like basis, the hotel portfolio increased by +0.5% over 6 months. This variation is mainly explained by the stabilization of capitalization rates and continued revenue growth, driven by the strong performance of variable revenue hotels and the indexation of fixed rents.  

-          The hotel portfolio has an average yield excluding duties of 6.0%.

3. FINANCIAL INFORMATION AND COMMENTS

Covivio’s activity involves the acquisition or development, ownership, management, and leasing of properties, particularly Offices in France, Italy and Germany, Residential in Germany, and Hotels in Europe. 

Registered in France, Covivio is a public limited company with a Board of Directors.

The German Residential information in the following sections include some Office assets owned by the subsidiary Covivio Immobilien.

CONSOLIDATED ACCOUNTS

3.1. Scope of consolidation 

On 30 June 2024, Covivio’s scope of consolidation includes companies located in France and several European countries. The main equity interests fully consolidated but not wholly owned companies are as follows:

3.2. Accounting principles

The consolidated financial statements have been prepared in accordance with the international accounting standards issued by the IASB (International Accounting Standards Board) and adopted by the European Union on the date of preparation. These standards include the IFRS (International Financial Reporting Standards), as well as their interpretations. The financial statements were approved by the Board of Directors on 19 July 2024. 

3.3. Simplified income statement - Group share

„  €314.1 million net revenue (+1%)

Net revenue in Group share increased especially thanks to both dynamic rental activity and strong operating activity in hotels, the reinforcement in Covivio Hotels, despite the impact of disposals in offices. Also refer to 1. Business Analysis

„  Amort. & net change in provisions:

Note that this item includes the amortisation linked to the right of use according to IFRS 16. This amortization of right of use is mainly related to owner-occupied buildings and headquarters.  

„  Change in the fair value of assets:

The income statement recognises changes in the fair value (-€246.7 million) of assets based on appraisals carried out on the portfolio. This line item does not include the change in fair value of assets recognised at amortised cost under IFRS but is taken into account in the EPRA NAV calculation (hotel operating properties, flex-office assets and other own occupied buildings). For more details on changes in the portfolio by activity, see section 1 of this document.

„  Income from asset disposals & disposals of securities:

Income from asset disposals contributed +€1.8 million during the period. 

„  Cost of net financial debt:

Restated of the other financial products and the capitalization of interests on projects under development, the cost of net financial debt increases due to the rise in interest rates partially offset by a decrease of the average net debt.  

„  Interest charges linked to finance lease liability:

The Group rents some land under long term leasehold. According to IFRS 16, such rental costs are stated as interest charges. The slight increase refers to the hotel activity linked to the reinforcement in Covivio Hotels and the evolution of the exchange rate GBP.

„  Value adjustment on derivatives:

The fair value of financial instruments (hedging instruments) is impacted by changes in interest rates. The P&L impact is a revenue of +€15.5 million.

„  Share of income of equity affiliates 

The equity affiliates include Hotels in Europe and the France / Italy Offices sectors:

•       OPCI Covivio Hotels: three hotel portfolios, B&B (16 hotels), Campanile (19 hotels) and AccorHotels (35 hotels) 80%-owned by Crédit Agricole Assurances.

•       Lenovilla: the New Vélizy campus (47,000 m²), let to Thalès and co-owned with Crédit Agricole Assurances.

•       Euromed in Marseille: one office building (Calypso) and a hotel (Golden Tulip) in partnership with Crédit Agricole Assurances. 

•       Coeur d’Orly in Greater Paris: two buildings in the Orly airport business district in partnership with ADP.

•       Phoenix hotel portfolio: 32% stake held by Covivio Hotels (52.5% subsidiary of Covivio) in a portfolio of 25 Accor Invest hotels in France & Belgium and 2 B&B in France.

•       Fondo Porta di Romana in Milan is a joint venture between Covivio (24.52%), Coima and Prada to participate to the acquisition of a plot of land in South Milan (future Olympic game village).

•       Zabarella in Padua is a joint venture between Covivio (64.74%) and Carron Cav. Angelo SpA (35.26%) to participate to the project in development Pauda Zabarella (transformation office to residential).

„  Taxes

The corporate income tax amounted to -€6.1 million driven by:

▪  Foreign companies that are not or are only partially subject to a tax transparency regime (Italy, Germany, Belgium, the Netherlands, and Portugal).

▪  French subsidiaries with a taxable activity.

Adjusted EPRA Earnings at €230.8 million