Paris-based property group Covivio announced this week that it will push forward with plans to develop €900 mln worth of properties in France, Germany, and Italy this year, despite the pandemic.
The company, which focuses on offices in Paris and Italy as well as German residential and European hotels, will commit to five major office developments in central business districts of European capitals, namely Corso Italia in Milan, a 60,000 m2 mixed-use project at Berlin’s Alexanderplatz, and the Anjou, Carnot, Laborde projects offering a total of 26,300 m² in Paris’ CBD.
‘We will commit to five new projects but only in the city centres,’ CEO Christophe Kullmaan said during an analyst presentation of the group’s full year 2020 results. Kullmann said the office market is increasingly polarised, with the pandemic resulting in increased demand and competition for city-centre best-in-quality assets and worsening conditions both in terms of take-up and incentives for other locations including La Défense.
‘We see a slight decrease in rents and an increase in incentives a bit everywhere except for city centres where we don’t see this type of evolution and there is strong appetite if you provide the best in class assets.’ He continued: ‘In order to respond to these new challenges, we are implementing three new measures, increasing our services offer, continuing to transform office properties into residential and selling mature assets,’ Kullmann said.
The group, which currently owns €17 bn of assets, plans to make no acquisitions in 2021 and it is envisaging the sale of roughly €600 mln of mature properties, roughly the same amount of last year. Kullmann: ‘Acquisitions are not the main topic this year, we want to continue to invest in the pipeline and reduce our loan-to-value below 40%. In terms of the disposal plan, we want to continue to dispose mostly mature office assets, but we will also divest some German flats and some hotels.’
With a €2.5 bn hotel portfolio across Europe, Covivio said up to 90% of its hotel portfolio was forced to close in 2020, leading to a 55% drop in revenue for this business segment. ‘We continue to consider hotels as a good investment activity. The question is when the market will return to normality,’ Kullmann said.
Due to uncertainty on the pace of recovery, the company is currently forecasting zero to €10 mln in terms of 2021 contribution from the European hotel activity and is giving a range for the EPRA Earnings guidance for 2021 of €4 to €4.2 per share, or €380 to €395 mln.
