SARCA PROPERTY SALE CRYSTALLISES 39% PERFORMANCE
PIRELLI 32 ACQUISITION IN LINE WITH PORTFOLIO CONSOLIDATION STRATEGY IN PORTA NUOVA
NET OPERATING PROFIT (EPRA EARNINGS) IN LINE WITH GUIDANCE
EPRA NET TANGIBLE ASSET GROWTH OF 2.7%
LTV STOOD AT 30.5%, AMPLE LIQUIDITY WITH OVER EURO 90 MILLION OF CASH ON BALANCE SHEET
RECOMENDED DIVIDEND OF EURO 0.30 PER SHARE, IN LINE WITH LAST TWO YEARS
Highlights of 2021 financial results
• Collected 100.0% of 2021 rent due (vs 99.4% in 2020)
• Like for like rental growth of +2.3% for office portfolio, excluding Monte Rosa
• Monte Rosa's redevelopment started following scheduled PWC release
• EPRA Earnings at Euro 15.0 million (or Euro 0.42 per share) in line with guidance
• Net profit up by ca. 50% to Euro 23.1 million
• EBITDA up by 40.6% to Euro 31.5 million
• EPRA Net Tangible Assets per share up by 2.7% to Euro 12.75
• Net LTV 7.8 p.p. lower at 30.5% (vs 38.3% at Dec-20)
• Ample liquidity with Euro 90.6 million of cash on balance sheet, primarily to fund capex plans
• Recommended dividend of Euro 0.30 per share, in line with last two years
Resilient real estate portfolio
• Portfolio focussed on offices (88%), Milan (92%) and Porta Nuova (59%)
• Sarca property disposal worth Euro 82.5 million at 36% premium vs purchase price
• Total disposals at a weighted average premium of 10% over the purchase price
• Acquisition of Pirelli 32 office complex in Milan's Porta Nuova
• Strong sustainability profile with 66% of portfolio LEED certified; a further 26% is eligible for LEED certification following refurbishment projects
• Leased/renewal ca. 12,800 sqm in 2021 with a stabilized rent of approx. Euro 6.8 million
• Corso Como Place project successfully launched in September with Accenture
• Approx. 25% of current portfolio value added to be repositioned in the medium term
• Potential for meaningful aggregate rent reversion on the back of refurbishments
Milan office market in 2021
• Prime yield tightening to 2.90% in 2021
• Rental volumes up 29%, rents up in Porta Nuova and Centro and stable in other sub-markets
• Slower investment market in 2021 with volumes down 32%
Manfredi Catella, Founder and CEO of COIMA RES, commented: “In 2021, we continued our strategy of consolidating the quality and positioning of the portfolio, selling Sarca with a performance of 39% and buying Pirelli 32 increasing exposure to the Porta Nuova district to 62%. We composed a portfolio consistent with the COIMA platform's extensive experience in creating value by repositioning properties, putting at the heart of these projects quantitative environmental impact objectives in terms of reduced energy consumption and CO2 emissions aligned with the European taxonomy that allows the company to have a LEED certified office portfolio, including ongoing developments, of 100%.”
Milan, February 25th, 2022 – The Board of Directors of COIMA RES approved the consolidated financial statements as at December 31st, 2021, at a meeting held under the chairmanship of Massimo Capuano.
Highlights of 2021 financial results
The 2021 results mainly reflect the sale of the Sarca property and PwC's planned release of approximately 8,000 sqm of the Via Monte Rosa property. The release will allow for the renovation of the Monte Rosa property resulting in a substantial improvement in the quality of the building and a potential increase in rents downstream of the renovation.
EBITDA increased by 40.6% to Euro 44.3 million mainly due to gain deriving from the disposal of the Sarca property. Financial expenses are substantially in line with last year.
Net profit increased of almost 50% to Euro 23.1 million due to the gain deriving from the disposal of the Sarca property. Recurring FFO and net operating profit (EPRA Earnings) declined respectively by 16.9% to Euro 20.1 million and by 14.3% to Euro 15.0 million, mainly due to lower NOI partially offset by lower recurring financial expenses.
As of February 24th, 2022, COIMA RES collected 100% of 2021 rents due (99.4% at the same date in 2021). On a like for like basis, gross rents for office portfolio increased by 2.3% (excluding Monte Rosa) on which the value generation project is launched.
In absolute terms, gross rents declined by 7.2% in 2021, the Net Operating Income (NOI) by 8.9% and the NOI Margin by 180 bps (to 89.0%), due to the release of PWC, which allows the start of the value generation of the Monte Rosa property, and to the positive results of the bank branches and Sarca property disposals program, partially offset by the evolution of rents on the properties in the portfolio.
G&A expenses are substantially in line with last year and equal to Euro 8.6 million.
Following of the Sarca property and a bank branch disposal, net of Euro 6.5 million of capex (on a pro-quota basis) and Euro 4.4 million of negative fair value change (on a pro-quota basis), the value of the portfolio declined in 2021 (on a pro-quota basis) to Euro 641.8 million, equal to 6.8% compared to December 31st, 2020.
EPRA Net Tangible Assets, as of December 31st, 2021, stood at Euro 460.5 million (or Euro 12.75 per share), an increase of 2.7% in 2021. The increase is mainly related to net operating profit (EPRA Earnings) of Euro 15.0 million, gain deriving from Sarca property disposal of Euro 13.0 million and negative revaluations for Euro 4.4 million (on a pro-rata basis), partially offset by the dividend payment of Euro 10.8 million. As of December 31st, 2021, the net LTV of COIMA RES stood at 30.5% (on a consolidated basis), a level 780 bps lower compared to December 31st, 2020. The consolidated cash position of COIMA RES as of December 31st, 2021, stood at Euro 90.6 million.
On the basis of the current portfolio perimeter, COIMA RES estimates to reach in 2022 a level of net operating profit (EPRA Earnings) equal to Euro 0.30 per share. The estimate reflects the release of approximately half of the Monte Rosa property by PwC during Q1 2021, the release of the Tocqueville property by Sisal during Q1 2022, the release of the Deruta property by BNL during Q2 2022 and other prudential considerations. The net operating profit (EPRA Earnings) guidance will be updated during the course of 2022 to reflect the evolution of COIMA RES’ activity during the year.
Dividend for 2021 of Euro 0.30 per share
The Board of Directors of COIMA RES resolved to propose to shareholders a dividend for the fiscal year 2021 of Euro 0.30 per share (amounting to Euro 10,831,967.40), in line with the dividend distributed in the last two years. An interim dividend of Euro 0.10 per share has already been paid on November 17th, 2021. The final dividend of Euro 0.20 per share will be distributed with an ex-dividend date on April 25th, 2022, record date on April 26th, 2022, and payment date on April 27th, 2022.
Microsoft: During the month of February 2021, the extension and amendment of the Euro 22.0 million financing of the Microsoft headquarters (provided by Intesa Sanpaolo) was finalised. The maturity of the financing was extended for a period of 3 years, i.e. from December 21st, 2020, to December 21st, 2023, and the margin was reduced by c. 15 basis points. In addition, the amended agreement provides the possibility of increasing the amount of the financing provided by Intesa Sanpaolo to a maximum of Euro 49.5 million at the same economic conditions.
COIMA RES: In December 2021, COIMA RES has agreed to enter into a new financing agreement with Crédit Agricole Corporate and Investment Bank (Agent), BNP Paribas, ING Bank and UniCredit for Euro 165.0 million for the financing of the real estate portfolio (for Euro 120.0 million) and the granting of a new line, for Euro 45.0 million, to support the capex plans relating to the Monterosa, Tocqueville and Deruta properties. The new loan is secured by the 100% directly and indirectly held properties and has a maturity of 5 years and an "all in" cost of c. 2.1%.
The financing was structured, with the support of ING Bank as green advisor, considering the alignment with the European taxonomy of environmentally sustainable economic activities on the basis of what was approved by the European Commission on April 21st, 2021, formally adopted on June 4th, 2021.
Real estate portfolio
As of December 31st, 2021, the COIMA RES portfolio consists of eight real estate properties mainly for office use located in Milan and 58 bank branches located in the North and Centre of Italy. The portfolio is valued at Euro 641.8 million (on a pro-quota basis), 92% of which is in Milan, 59% in Milan Porta Nuova and 88% is for office use. COIMA RES’ portfolio has a high sustainability profile as approximately 66% of the portfolio is LEED certified; a further 26% is eligible for LEED certification following refurbishment projects. COIMA RES’ portfolio of tenants is mostly comprised of mid to large sized multinational corporations: the list of the ten largest tenants (representing 89% of the stabilised rent roll on a pro-quota basis) includes Vodafone, Sisal Group, Deutsche Bank, BNP Paribas, Microsoft, IBM, Accenture, Techint, NH Hotel and Bernoni Grant Thorton. In line with its business model and strategy, COIMA RES is considering further disposals of mature, non-core and non-strategic assets as well as the refurbishment and repositioning of selected assets within its portfolio in order to align them to the evolution of tenants’ demand and to generate rental growth.
Microsoft: On April 6th, 2021, a new lease agreement was signed for ground floor retail in the Microsoft property (about 400 sqm), previously occupied by Microsoft. The new agreement has a duration of nine years (with eight months of free rents) with an annual rent, for the first two years, amounting to Euro 200 thousand and, for the following years, amounting to Euro 280 thousand.
Sarca: In June 2021, COIMA RES, before the disposal of the property, signed a binding offer with an energy supply company for approximately 700 sqm of office space. The space is currently occupied by Signify, which exercised the break-option with the release of the spaces in October 2021. The binding offer provides for the signing of a contract that has a duration of six years at a fee approximately 23% higher than to the one in place.
Corso Como Place: In April 2021, COIMA RES signed a new lease agreement with Mooney (formerly Sisal Pay) for approximately 3,250 sqm of office space. The new contract has a duration of six years and the rent is higher than the rent foreseen under the previous lease agreement.
Tocqueville: In May 2021, COIMA RES signed an amending agreement to the lease agreement with Sisal to extend the duration of a further three months, postponing the new contractual deadline to March 31st, 2022. The rent to be applied in the extension period provides for an increase equal to 50% compared to the current one.
Bank branches: In January 2021, COIMA RES completed the disposal of a bank branch in Milan for a value of Euro 4.3 million. The disposal refers to a broader portfolio of 11 bank branches which was sold by COIMA RES in the period between January 2020 and January 2021 for a total value of Euro 23.5 million. Since its IPO in 2016, COIMA RES has disposed approximately 48% of the initial bank branches portfolio at a valuation broadly in line with the IPO contribution value, raising gross proceeds from the disposals of approx. Euro 66.3 million.
Sarca: On August 5th, 2021, the disposal of the office building located in the Bicocca district of Milan, Viale Sarca 235 (the "Sarca" building) to a primary local investor was completed at a price of Euro 82.5 million. The sale price corresponds to a net exit yield of 4.6%, and a premium of 36% over the acquisition price. As part of the transaction, the seller issued, in favour of the purchaser, a guarantee in relation to the payment of rents by the tenants currently renting the property. COIMA RES had acquired the Sarca property in 2019 at a valuation of Euro 60.7 million (EPRA Topped-up Net Initial Yield of 5.9%) and the sale price implies an Unlevered IRR of 24% (Levered IRR of 39%).
Since the IPO as at December 31st, 2021, COIMA RES has acquired real estate assets for a total value of Euro 850.8 million (on a pro-rata basis) and made disposals for a total value of Euro 324.8 million (on a pro-rata basis), with the disposals taking place at a weighted average premium of 10% over the purchase price.
On February 9th, 2022, COIMA RES announced that it has reached an agreement for the purchase of an office complex in Via Giovanni Battista Pirelli, 32, Milan ("Pirelli 32") for Euro 58.2 million. The property will be acquired through COIMA Opportunity Fund I, which is 78.29% owned by COIMA RES and the transaction is expected to close by the end of Q1 2022.
The acquisition will be financed mainly with resources from the sale of the Sarca property, which was finalised in August 2021 at a 36% premium to the acquisition price. The value created by the asset management and sale of the Sarca property has made it possible to invest in a property in Porta Nuova that will benefit both from the enhancement of the neighbourhood, which is set to be the main post-Covid urban campus, and its expansion, with the Porta Nuova Gioia redevelopment plan, which involves the construction of a new office building.
Pirelli 32 is a 13-storey building with a surface area of about 7,400 square metres, located along the east-west axis connecting the two high-speed railway stations of Milano Centrale and Milano Garibaldi, within the north-east quadrant of Porta Nuova where the area’s new developments are concentrated.
The development of the property will involve an investment of over Euro 30 million, with the objectives of substantially contributing to the mitigation of climate change according to the European taxonomy framework for eco-sustainable economic activities (EU 2020/852) for the construction of new buildings.
Corso Como Place: The project was completed in Q4 2020 and has been delivered to the tenants Accenture and Bending Spoons in January 2021. As a reminder, in 2019 Accenture and Bending Spoons signed preliminary leasing agreements for the entire office portion of the project (buildings A and C) representing 95% of the surfaces developed.
Other projects: PwC's release of the Monte Rosa property will allow it to perform a renovation and value creation project in the medium term that will lead to a substantial improvement in the quality of the property and a potential significant rental growth. Further details on the renovation plan for the Monte Rosa property will be published in the coming months. In addition to the Monte Rosa property, further renovation plans are planned for the period 2022-2024. These renovation projects are intended to achieve significant rental growth once the works are completed and the space is relocated, and a marked improvement in the sustainability profile of the Company's portfolio.
The COVID-19 crisis caused social and economic challenges on a global scale and most likely remains an issue to be considered today.
COIMA believes that the potential increase in the adoption of the “working from home” practice will influence future tenant demand for office space from both a qualitative and quantitative point of view. A recent survey carried by COIMA with 38 corporates who lease office space in Italy (and in particular in Milan), confirmed the fact that companies are likely to increase the possibility for employees to work remotely, however, such increase would not structurally undermine the need to have an office footprint. The likely reduction in office space requirements associated to the increased adoption of remote working by corporates appears relatively marginal, albeit not negligible, and therefore is not something that would create a structural impairment of the office sector going forward.
COIMA foresees that offices and their use will change in the medium-term from places of “production” to places of “interaction”. Therefore, the features of offices (from the point of view of their location as well as in terms of their technical and architectural characteristics) would need to evolve in order to maximise the engagement and productivity of employees and stimulate their creative potential.
Finally, COIMA believes that the polarisation between qualified neighbourhoods and undifferentiated neighbourhoods will consolidate and accelerate further and that qualified neighbourhoods will continue to attract high-quality office tenant demand and maintain limited level of office vacancy in the medium-term. COIMA defines qualified neighbourhoods as the districts which have a “higher than average” score in terms of accessibility to public transport, availability of services and wellness options, availability of public parks and a high degree of diversification in terms of end uses.
Annual General Meeting
The Annual General Meeting will be convened pursuant to current laws and regulations to deliberate on the following items:
• Approval of the financial statements as at December 31st, 2021 and presentation of the consolidated financial statements as at December 31st, 2021
• 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 financial year 2022
• 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, it will be proposed in the context of the Annual General Meeting to renew the authorisation to the Board of Directors for the purchase and disposal of own shares, for a period of 18 months and a maximum amount equal to 20% of the share capital, for the same purposes and under the same price conditions provided for in the authorisation granted by the Annual General Meeting held on April 22nd, 2021.
COIMA RES will discuss its results during a public conference call on February 25th, 2022, at 3:00 p.m. (Italy time). The call will be held in English and the presentation will be available on the company website (https://www.coimares.com/en/investors/results-and-publications). To participate in the call, please call on of the following numbers:
Italy: +39 028020902
UK: +44 2030595875
USA: +1 7187058795
This press release may contain forecasts and estimates which reflect the current management expectations on future events and developments and, therefore, by their nature, forecasts and estimates involve risks and uncertainties. Considering such risks and uncertainties, readers are cautioned not to place undue reliance on these forward-looking statements which should not be considered as forecasts of actual results. The ability of COIMA RES to achieve the expected results depends on many factors outside of management’s control. Actual results could cause the results to differ materially (and to be more negative) from those expressed or implied in the forward-looking statements. Such forecasts and estimates involve risks and uncertainties that may significantly affect the expected results and are based on certain key assumptions. The forecasts and estimates expressed herein are based on information made available to COIMA RES as of the date hereof. COIMA RES does not assume any obligation to publicly update and review these forward-looking statements to reflect new information, events or other circumstances, subject to compliance with applicable laws.
The Executive responsible for the preparation of the company’s accounting documents, Fulvio Di Gilio, declares that, pursuant to the art. 154-bis comma 2 of the Consolidated Financial Act, the accounting information given in this press release corresponds to accounting documents, books and entries.