Board of Directors approves results as of december 31st, 2019
EPRA earnings 11% ahead of guidance at euro 0.39 per share
NAV per share growth of 5.0% and return on equity of 7.6%
Dividend of euro 0.30 per share for 2019
90% of portfolio in Milan and 50% in Porta Nuova
Solid financial results in 2019
• Gross rents up by 3.0% year-on-year to Euro 37.3 million
• NOI margin increased by 50 bps year-on-year to 89.6%
• EBITDA Adj. up by 3.9% year-on-year to Euro 24.6 million
• EPRA Earnings 11% above guidance at Euro 0.39 per share
• EPRA NAV per share up 5.0% to Euro 12.29
• Return on Equity equal to 7.6%
• Net LTV marginally increased by 5.3 p.p. to 38.8%
• Proposed dividend of Euro 0.30 per share for 2019, in line with 2018
Solid performance of the real estate portfolio in 2019
• Portfolio made for 85% of office assets, 90% in Milan and 50% in Porta Nuova
• High sustainability profile with 64% of portfolio LEED certified
• Rental growth of 1.0% on a like for like basis
• Capital value growth of 2.7% on a like for like basis
• EPRA occupancy rate increased by 260 bps to 98.0%
Active portfolio management in line with strategy
• Increased diversification through disposal of 50% of Vodafone complex
• Acquisition of Microsoft and Philips headquarters in Milan
• Continued disposal of bank branches reducing overall exposure below 10%
• Corso Como Place project validated through Accenture and Bending Spoons pre-let
Record year for the Milan office market
• Investment volumes up 76% to Euro 3.7 billion
• Take up increased by 26% at 480,000 sqm
• Persistent low vacancy at 1.9% for Grade A properties
• Positive rental growth outlook, especially for Porta Nuova
Manfredi Catella, Founder and CEO of COIMA RES, commented:
“In the last twelve months we continued to execute our strategy by increasing the quality and diversification of our real estate portfolio and by further concentrating our exposure to Milan, the most liquid commercial real estate segment in Italy, and to the high growth district of Porta Nuova. Going forward we will continue to optimise and improve our portfolio, also through targeted refurbishment programs, with the aim to deliver attractive office space to tenants and an attractive risk-return profile to shareholders.”
Milan, February 21st, 2020 – The Board of Directors of COIMA RES approved the consolidated financial statements as at December 31st, 2019, at a meeting held yesterday under the chairmanship of Massimo Capuano.
Solid financial results in 2019
Gross rents increased by 3.0% in 2019 to Euro 37.3 million, mainly due to the increased consolidation perimeter as a result of the acquisitions of the Tocqueville, Pavilion, Philips and Microsoft properties, partially offset by the disposal of the Eurcenter property. On a like for like basis, gross rents increased by 1.0% in 2019.
The NOI increased by 3.5% to Euro 33.4 million in 2019, the NOI margin increases by 50 bps and stands at 89.6% mainly thanks to the different asset mix.
EBITDA decreased by 6.2% to Euro 23.5 million in 2019, mainly due to the “one off” positive impact of the gain related to the sale of the Eurcenter booked in 2018, partially offset by higher NOI, a 5% decrease in recurring overhead costs and the by the accrual in 2018 of the promote fee in favour of COIMA SGR and the coupon in favour of the key managers (not accrued in 2019). The EBITDA adjusted for non-recurring items has grown by 3.9% to Euro 24.6 million.
Recurring financial expenses increased by Euro 0.7 million in 2019 due to the higher level of gross debt between 2019 and 2018. The remaining Euro 2.7 million increase in financial expenses mainly pertains to non-recurring items related to the anticipated repayment of outstanding loans in June 2019 related to the Vodafone transaction (of which only 50% relates to COIMA RES).
Net Profit decreased by 30.9% to Euro 32.0 million in 2019 mainly due to “one off” impact of the Pavilion revaluation recorded in 2018, lower EBITDA, increased financial expenses and the effect of the disposal of a 50% stake in the Vodafone complex which has increased minorities.
Recurring FFO and EPRA Earnings decreased respectively by 0.2% to Euro 17.6 million and by 7.2% to Euro 14.0 million in 2019 mainly due to higher financial expenses (and the effect of the increase in minorities on the EPRA Earnings).
EPRA NAV, as of December 31st, 2019, stood at Euro 443.9 million (or Euro 12.29 per share), an increase of 5.3% in 2019. The increase is related to the contribution of EPRA Earnings of Euro 14.0 million and net revaluations and gains for Euro 18.5 million (on a pro-rata basis) and other items for Euro 0.6 million, partially offset by the dividend payment of Euro 10.8 million. As of December 31st, 2019, the net LTV of COIMA RES stood at 38.8%.
Proposed dividend for 2019 of Euro 0.30 per share
COIMA RES intends to offer its shareholders a stable and sustainable dividend that is balanced with the requirements deriving from refurbishment activities on some properties in the portfolio and with potential requirements for the acquisition of new properties.
The COIMA RES Board of Directors resolved to distribute to shareholders a dividend for the fiscal year 2019 of Euro 0.30 per share (Euro 10,831,967.40), an amount in line with the dividend paid for the fiscal year 2018. The proposed dividend (of which Euro 0.10 already paid in November 2019 as interim dividend) includes a component of Euro 0.06 per share related to the capital gain realised in 2019 in relation to the transaction on the Vodafone complex. An additional dividend related to such transaction, of approx. Euro 0.06 per share, will be paid in 2021.
Considering the interim dividend of Euro 0.10 per share already paid in November 2019, the final dividend of Euro 0.20 per share will be paid with an ex-dividend date on April 27th, 2020, record date on April 28th, 2020, and payment date on April 29th, 2020. 4
Real estate portfolio overview
As of December 31st, 2019, the COIMA RES portfolio consists of 9 office properties located in Milan and 58 bank branches located in the North and Centre of Italy. The portfolio is valued at Euro 688.4 million (on a pro-rata basis), 90% of which is in Milan, 50% in Milan Porta Nuova and 85% is for office use. Our portfolio has a high sustainability profile: approximately 56% of the portfolio is currently LEED certified, increasing to 64% including the Corso Como Place project where the aim is to achieve a LEED Gold certification.
The value of the portfolio increased by Euro 34.0 million in 2019 (on a pro rata-basis), due to acquisitions for Euro 138.2 million, capex for Euro 9.8 million and revaluations on the current portfolio for Euro 16.5 million, partially offset by disposals for Euro 130.5 million. Capital value grew by 2.7% on a like for like basis.
In line with its strategy of focussing on high quality office properties in Milan, COIMA RES acquired in 2019, through an “off market” transaction, two office properties in Milan, fully let, for an aggregate value of Euro 158 million at a blended EPRA Topped-up Net Initial Yield of 5.0% (EPRA Net Initial Yield of 4.5%). The two properties were the Microsoft headquarters in Milan Porta Nuova valued at Euro 97.5 million and the Philips headquarters in Milan Bicocca valued at Euro 60.7 million. The acquisition of the two properties was performed through COIMA Core Fund VI (a fund which is 88% owned by COIMA RES), which acquired units in funds held by a group of Italian investors. Because of the transaction structure, COIMA RES acquired a stake of 83.5% in the Microsoft headquarters and of 78.3% in the Philips headquarters (on a look-through basis).
In 2019, COIMA RES continued to reduce its exposure to non-strategic and mature assets and to reduce its tenant and asset concentration.
Bank branches: in November 2019, COIMA RES signed a preliminary agreement for the sale of a portfolio of 11 bank branches located in the North of Italy. The agreed sale price for the portfolio is Euro 23.5 million, a value in line with the book value as appraised by the independent appraiser. On January 15th, 2020, the sale of 8 of the 11 branches was completed. The sale of the remaining 3 branches will be completed by June 2020. In addition, in 2019, COIMA RES sold one bank branch in Pisa and one floor at a bank branch located in Genova for Euro 1.3 million. Since IPO, COIMA RES has sold 48% of the initial portfolio for Euro 66 million at a valuation in line with the contribution value.
Vodafone complex: in June 2019, Meritz Financial Group, a financial holding company from South Korea, acquired a 50% stake in the Vodafone complex from COIMA RES. The transaction valued the complex at a 4% premium to acquisition price and at a 2% premium to the previous appraisal value, representing an EPRA Net Initial Yield of 6.1% and a 13% levered IRR (8% unlevered IRR). COIMA RES continues to consolidate the Vodafone complex given the governance structure. 5
In 2019, new leases worth Euro 10.0 million per annum were signed, including the significant lettings for the Corso Como Place project.
Corso Como Place: between August and September 2019, Accenture and Bending Spoons signed two preliminary leasing agreements for the entire office portion of the project (building A and C) for a total of 18,000 sqm. The pre-lets were signed 12 months in advance of the delivery of the building. The agreements with Accenture and Bending Spoons will generate a gross rent of Euro 8.9 million per annum at a stabilised level. The delivery of the property is scheduled for 2020.
Tocqueville: Sisal, the main tenant of the Tocqueville property, has agreed to an amendment to the lease agreement that extends the expiration date to December 31st, 2021, against an increase, of Euro 1.0 million, in the gross rent for 2021.
Gioiaotto: Alexion Pharma signed a leasing agreement for 770 sqm previously occupied by axélero for Euro 410,000 per annum on a stabilised basis. The rental level agreed with Alexion Pharma represents a premium of 50% vs the previous in place rent.
Bank branches: COIMA RES signed two leasing agreements for two bank branches previously vacant representing a total surface area of c. 6,000 sqm (c. 60% of the total vacant surface within the bank branches portfolio) and additional gross rents of Euro 660,000 on a stabilised basis. The two bank branches are in Milan and Turin. The bank branch in Milan was part of the perimeter of the disposal announced in November 2019.
Corso Como Place: the project is well on track for delivery in 2020 within the overall budgeted cost of approx. Euro 169 million, including the initial Euro 89 million acquisition price, capex and other capitalised costs of approx. Euro 71 million and other costs (including tenant incentives) of approx. Euro 9 million. As of December 31st, 2019, the project advancement rate was approx. 60%. Considering the pre-letting activity performed, the estimated Gross Yield on Cost for the project is c. 6.7%, i.e. 90 bps higher than the assumption at the time of the acquisition of 5.8%.
Outlook and guidance
COIMA RES continues to focus on Milan offices, the largest, most resilient, liquid and transparent real estate market in Italy. As far as the current portfolio is concerned, COIMA RES will consider further disposals of mature, non-strategic and non-core assets on an opportunistic basis as well as refurbishment plans in the medium term. COIMA RES continues to carefully and selectively assess asset acquisition opportunities. Based on the current portfolio perimeter, COIMA RES estimates to achieve EPRA Earnings per share of approx. Euro 0.40 in 2020. The guidance will be updated over the course of 2020 to reflect any meaningful update.
Reinvestment by COIMA SGR of the promote fee
In 2019, COIMA SGR reinvested the 2018 promote fee in COIMA RES shares acquired in the market. The stake held by COIMA RES’ Founders (Manfredi Catella, Gabriele Bonfiglioli, Matteo Ravà, COIMA SGR and COIMA Srl) has doubled from 0.7% to 1.4% since IPO to today for a total investment equal to Euro 5 million. 6
The Annual General Meeting will be convened pursuant to current laws and regulations to deliberate on the following items:
• Approval of the financial statements at December 31st, 2019 and presentation of the consolidated financial statements at December 31st, 2019
• Allocation of the operating result and proposed dividend distribution
• Report on the remuneration policy and the remuneration paid
• Appointment of the Board of Directors for the 2020 financial year
• Authorisation to purchase and dispose of own shares pursuant to art. 2357 of the Italian Civil Code, subject to revocation of the previous authorisation
With reference to this last point, the Annual General Meeting will propose to authorise the Board of Directors to purchase and dispose of own shares, subject to revocation of the authorisation granted by the Annual General Meeting of April 17th, 2019. In particular, it will be proposed to authorise purchases of own shares for a period of 18 months, while authorisation for disposal is required without time limits. Purchases of own shares may be made up to the maximum permitted by law, equal to 20% of the share capital, for the following purposes: (i) support for the liquidity of the security; (ii) carry out medium and long-term liquidity investment transactions, also to establish long-term investments, or in any case to seize opportunities to maximize the value that may derive from market trends; (iii) allow the use of own shares in the context of operations related to current management or extraordinary operations in line with the strategic guidelines of COIMA RES; (iv) fulfil the obligations possibly deriving from debt instruments convertible into shares; (v) fulfil the obligations deriving from any future option programs on shares or other assignments of shares to employees or members of the administrative bodies of COIMA RES and / or companies directly or indirectly controlled, as well as from any free assignment programs of shares to shareholders.
Purchases must be made at a price not higher than the highest price between the price of the last independent transaction and the price of the highest independent offer currently on the MTA. The disposal of own shares, if carried out through cash transactions, cannot be made at a price 20% lower than the reference price recorded by the security on the MTA in the stock exchange session preceding each individual transaction.
The Board of Directors also resolved to modify the By-laws to adapt it to the new rules on gender quotas in the composition of the corporate bodies introduced by Law no. 160 of December 27th, 2019 (Budget Law 2020). The updated By-laws will be made available to the public in the manner and within the timeframe provided for by current legislation.