COIMA RES - Stable financial results in Q1 2019




Like for like rental growth of 6.2%
- Gross rents broadly stable year-on-year at Euro 8.7 million
- EBITDA up by 5.6% year-on-year to Euro 5.5 million
- Net Profit up by 37.8% year-on-year to Euro 4.7 million
- EPRA NAV per share up 1.1% to Euro 11.84
- Conservative LTV of 34.0%
- Cash balance in excess of Euro 80 million allows to pursue acquisitions

Active asset management
- Euro 1.1 million of new leases
- Leasing of two vacant branches
- Reletting of one entire floor at Gioiaotto at 50% premium
- Disposal of one bank branch at 4.2% premium

Corso Como Place project on track
- Refurbishment project on track for completion in 2020
- Planned capex of Euro 22.2 million for 2019-2020
- Aiming to pre-let significant portion of the project in 2019

- Dynamic investment environment with Euro 760 million in transactions
- Milan office take up growing by 50% at 121,000 sqm
- Record low vacancy at 2.1% for Grade A properties
- Positive rental growth outlook, especially for Porta Nuova

Manfredi Catella, Founder and CEO of COIMA RES, commented: “In the first quarter of 2019 we made positive progress in both leasing and disposals. During the period, we also progressed on the Corso Como Place project which is due to complete in 2020 and for which we are in advanced discussions with prospective tenants. The outlook for Milan offices remains positive on both the investments and the letting side supporting the attractiveness of our portfolio which is now 90% concentrated in Milan and 40% concentrated in Porta Nuova.”

Milan, May 3rd, 2019 – The Board of Directors of COIMA RES approved the consolidated financial statements as at March 31st, 2019, at a meeting held yesterday under the chairmanship of Massimo Capuano.

Stable financial results in Q1 2019 and prudent leverage maintained

Over the course of 2018, COIMA RES executed on its strategy of concentrating its activities on the Milan office segment as the most resilient, liquid and transparent market in Italy. Within the Milanese context, COIMA RES increased its exposure to properties in more central locations such as Porta Nuova. As a result of this strategy, COIMA RES’ exposure to Milan increased to 90% (from 70% as of December 31st, 2017) and the exposure to Porta Nuova increased to 40% (from 20% as of December 31st, 2017). Management has also opted for a more conservative stance on leverage.

Based on the above, gross rents marginally decreased by 1.2% in Q1 2019 to Euro 8.7 million (from Euro 8.8 million in Q1 2018), in particular due to the timing effect of the disposal of the Eurcenter property in Rome (sold in Q4 2018) and the completion of the disposal of the 21 Deutsche Bank branches located in the South of Italy (completed in Q1 2018) partially offset by the acquisition of the Tocqueville and Pavilion properties in Milan Porta Nuova (both acquired in H2 2018).

The NOI margin in Q1 2019 stood at 89.1% which is in line with the FY 2018 level and marginally lower by 30 bps compared with the level recorded in Q1 2018 (mainly due to the different asset mix in the two quarters). As a result, the NOI marginally decreased by 1.5% to Euro 7.8 million in Q1 2019.

EBITDA grew by 5.6% to Euro 5.5 million in Q1 2019 as the marginal reduction in NOI was more than compensated by a reduction in non-recurring costs.

In terms of financing structure, COIMA RES purposely opted to retain a cash balance in excess of Euro 80 million in Q1 2019, in large part deriving from the Eurcenter disposal, which gives management the flexibility to pursue acquisitions. As a result of this approach, interest expenses have increased by 7.3% in Q1 2019 vs Q1 2018 mainly due to the overall increase in Gross Debt which stood at Euro 291 million as of March 31st, 2019 (vs Euro 240 million as of March 31st, 2018). The weighted average “all-in” cost of debt remained at 2.0% in Q1 2019 (broadly in line with Q1 2018). Recurring FFO per share and EPRA Earnings per share decreased respectively by 9.2% to Euro 0.11 and by 11.8% to Euro 0.10 in Q1 2019 mainly due to increase in financing expenses.

Net Profit increased by 37.8% to Euro 4.7 million in Q1 2019 (from Euro 3.4 million in Q1 2018) mainly due to the positive revaluation accounting for Euro 1.2 million related to a previously vacant bank branch in Milan for which a leasing agreement was signed in Q1 2019.

EPRA NAV as of March 31st, 2019, was Euro 426.3 million (or Euro 11.84 per share), an increase of 1.1% in Q1 2019. The increase is related to the contribution of EPRA Earnings of Euro 3.5 million and the bank branch revaluation accounting for Euro 1.2 million.

As of March 31st, 2019, LTV for COIMA RES was 34.0% (Corso Como Place accounted on a pro rata basis), weighted average debt maturity was 4.1 years, weighted average “all-in” cost of debt was 2.0% and 75% of the outstanding debt was hedged against the impact of interest rate movements. 4

Stable real estate portfolio, 6.2% like for like rental growth

As of March 31st, 2019, COIMA RES portfolio consists of 76 properties (7 office properties located in Milan and 69 bank branches located in the North and Centre of Italy) with a total commercial surface area of 189,000 sqm. The portfolio is valued at Euro 666.6 million (90% of which is in Milan, 40% in Milan Porta Nuova and 80% is offices).

The value of the portfolio increased by Euro 2.7 million in Q1 2019 mainly due to the Euro 2.0 million of capex spent on the Corso Como Place project (previously known as Bonnet) and the Euro 1.2 million revaluation booked on a bank branch, partially offset by the disposal of a bank branch in Pisa (Tuscany, Centre of Italy) for Euro 0.5 million (sold at a 4.2% premium to book value).

The Q1 2019 like for like rental growth stood at 6.2% across the portfolio for Q1 2019 (or 7.5% excluding bank branches), mainly driven by the Pavilion leasing which became effective on January 31st, 2019. Excluding the Pavilion, the like for like rental growth in Q1 2019 stood at 2.4%.

New leases for Euro 1.1 million

Gioiaotto: in April 2019, Alexion Pharma signed a binding term-sheet for the leasing (on a 7 + 6 years basis) of 770 sqm currently occupied by axélero. The rental level agreed with Alexion Pharma is Euro 500 / sqm representing a premium of 50% vs the current in place rent (on a stabilised basis). The new lease is subject to axélero releasing the space by the end of Q3 2019 (which axélero has already agreed to). Overall, more than 2,000 sqm were released at Gioiaotto in the last 12 months and the new leases were agreed at a blended premium of 30% vs previous rents in place.

Bank branches: In the first four months of 2019, 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 as of December 31st, 2018) and additional gross rents of Euro 660,000 on a stabilised basis. The two bank branches are in Milan and Turin with a surface area of 1,700 sqm and 4,300 sqm respectively. Up to Euro 50,000 of capex will be spent by COIMA RES to adapt the premises. Following the two successful leasing transactions, the total number of vacant branches has been reduced by 40% to three branches (from five branches as of December 31st, 2018) and the vacant surface within the bank branch portfolio has been reduced by 60% (from 9,700 sqm as of December 31st, 2018 to 3,900 sqm). The vacancy rate in the bank branch portfolio has also been reduced from 22% as of December 31st, 2018 to 9%.

Corso Como Place refurbishment project on track

The project (previously known as Bonnet) is well on track for delivery in 2020 within the overall budgeted cost of Euro 164 million, including the initial Euro 89 million acquisition price plus total capex and other capitalised costs of Euro 75 million. Overall capex and other capitalised costs spent in 2016-2018 amount to Euro 12.7 million with a further Euro 62.3 million expected to be spent in 2019-2020 (of which Euro 22.2 million will be spent by COIMA RES in 2019-2020 given its 35.7% stake in the project). Capex spent in the project in Q1 2019 amounts to c. Euro 5.5 million (of which Euro 2.0 million representing COIMA RES’ share given its 35.7% stake in the project). The pre-leasing activity commenced in September 2018 with the aim of pre-letting a significant portion of the project in 2019. 5

Further disposal in the bank branch portfolio

In March 2019, COIMA RES sold one Deutsche Bank branch in Pisa (Tuscany, Centre of Italy) for Euro 500,000, at a premium of 4.2% vs the book value as of December 31st, 2018. With this disposal, COIMA RES has sold 27 bank branches for Euro 42.0 million (equal to 30% of the initial portfolio), at an aggregate price in line with the initial contribution value at the time of the IPO.


At a time of macro uncertainty in both Italy and Europe, COIMA RES is continuing to focus on Milan offices, Italy’s largest, most resilient, transparent and liquid real estate market. Milan accounted for more than 60% of the overall Italian office market, both by number of transactions and investment volumes over the last four years. Milan is characterised by strong supply and demand fundamentals, in particular due to the scarcity of Grade A space, which represents only 10% of total office stock, but accounts for 70% of total take up. This imbalance suggests demand may outstrip supply by a factor of 2-3x over the next few years and underpins strong near-and-medium term rental upside.

As far as the current portfolio is concerned, COIMA RES will consider further disposal on an opportunistic basis in order to increase its exposure to Milan and to balance tenant concentration.

COIMA RES continues to carefully and selectively assess investment opportunities in Milan given its growth potential and relative through-the-cycle resiliency. Asset selection will emphasize Core and Core + office assets.


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