2017 guidance raised following Eurosic’s
integration
At least +6% recurrent net income growth
expected excluding healthcare (vs. -5% to -6% initially)
Regulatory News:
The third quarter of 2017 was marked by Eurosic’s consolidation
in Gecina’s (Paris:GFC) accounts from August 29, 2017, with
nearly €23.0M of gross revenues recorded from Eurosic. Restated
for the healthcare portfolio’s sale (finalized on July 1,
2016), the Group’s gross revenues are up +1.1%. The
first effects of this consolidation, the organic performance
achieved and the impact of the buildings delivered in 2017 are
already offsetting the loss of rent following the transfer of five
buildings with strong value creation potential within the project
pipeline and the sales completed in 2016.
Acceleration of organic rental income growth and lettings in
a buoyant market
- Market still buoyant,
particularly in Gecina’s preferred sectors
- Rental income for offices up +2.3%
like-for-like (+2.1% at end-June and +1.2% at end-March)
- 197,000 sq.m let, pre-let, relet or
renegotiated since the start of the year1
- 40,000 sq.m delivered since the
start of the year for Gecina’s scope, including two student
residences in La Défense and Marseille and two office buildings in
Paris and Lyon
- 10,000 sq.m delivered for Eurosic’s
scope, primarily in Paris’ central business district (CBD)
Largely risk-free project pipeline, driving growth from
2018
- Strong progress with the pipeline
letting rate since the start of the year, up from 22% at
end-2016 to nearly 50% at end-September 2017 (for the same
scope)
- Combined committed pipeline
representing nearly €2.5bn on a Group share basis at
end-September, with an expected yield on delivery of around 5.6%
and 93% located in Paris City or the Western Crescent’s most
central sectors (La Défense, Neuilly, Levallois and
Issy-les-Moulineaux)
- 17 projects expected to be delivered
by end-2018, including 15 office programs representing over
260,000 sq.m and potential annualized rental income of over
€100M (Group share)
- Total combined pipeline of around
€4.8bn, primarily in Paris City, with an expected yield of
nearly 6%
Continued optimization of liabilities and increase in the
float
- €2.2bn of bonds placed since the
start of the year, with an average maturity of 10 years and an
average coupon of 1.3%
- Successful redemption of outstanding
bond issues due to mature in 2019, 2020 and 2021 for €274M,
with an average coupon of 4.0%
- Successful capital increase
excluding subscription rights for €1bn in August, making it
possible to finalize the financing for Eurosic’s acquisition and
increase the float by almost +10%
2017 targets raised: +6% compared with 2016 recurrent net
income restated for healthcare (vs -5 to -6% expected)
Based on the good level of the Group’s key markets, the
optimization of its liabilities and the accretive effects linked to
Eurosic’s integration, Gecina is able to raise its targets for 2017
and is now forecasting at least +6% recurrent net income growth
(+4.5% per share2) restated for the impact of the healthcare sale,
representing a minimum of €340M (€5.20 per share).
Key figures
All the figures presented in this press release include Eurosic
from August 29, 2017, when Gecina acquired 85% of its capital. The
like-for-like information given here excludes the Eurosic
portfolio.
Gross rental income Sep 30, 16 Sep 30, 17
Change (%) In million euros
Current basis Like-for-like
Offices 283.8
285.0 +0.4% +2.3%
Diversification 135.4 94.0 -30.6%
+0.4% Traditional residential 85.8 81.9 -4.5% +0.1% Student
residences 10.3 10.7 +4.2% +2.9% Other business 39.4
1.4 -96.5% n.a.
Total gross rental income
419.2 379.0 -9.6%
+1.8% Hotels - 3.7 n.a. n.a. Finance leases -
1.2 n.a. n.a.
Total gross revenues
419.2 383.9 -8.4%
(+1.1% excl. impact of healthcare
sale)
+1.8%
The Group’s total gross revenues came to €383.9M at
end-September 2017, down -8.4% year-on-year on a current basis,
notably taking into account the impact of the healthcare
portfolio’s sale (finalized on July 1, 2016). Restated for this
portfolio’s sale, gross revenues are up +1.1%. The impact of
Eurosic’s consolidation from August 29 is still moderate at this
stage, contributing €23.0M, with €18.0M of rental income.
Like-for-like, their growth comes out at +1.8% compared with the
first half of the year (+1.6%) and the first quarter of 2017
(+1.0%), driven by the Group’s operational performance, notably
supported by the solid trends for Gecina’s leading office rental
markets.
Méka Brunel, Chief Executive Officer: “This publication once
again confirms that this has been a historic year, in terms of not
only the positive real estate market trends for our preferred
sectors, but also commercial activity and the acceleration of our
strategy with the acquisition of Eurosic. The process to acquire
Eurosic is now nearing completion, since Gecina already holds more
than 99% of its capital, and we are very confident about the
stakes involved with this integration. We are looking ahead to the
future with confidence, with the accretive impacts of Eurosic’s
acquisition, as well as a project pipeline that is largely pre-let
and is expected to drive the Group’s growth over the coming
years”.
Financial schedule2017 full-year
earningsFebruary 21, 2018 (after close of trading)
Improvement in rental income, in line with the Group’s
expectations
Gross rental income Sep 30, 16 Sep 30, 17
Change (%) In million euros
Current basis Like-for-like
Offices 283.8
285.0 +0.4% +2.3%
Diversification 135.4 94.0 -30.6%
+0.4% Traditional residential 85.8 81.9 -4.5% +0.1% Student
residences 10.3 10.7 +4.2% +2.9% Other business 39.4
1.4 -96.5% n.a.
Total gross rental income
419.2 379.0 -9.6%
+1.8% Hotels - 3.7 n.a. n.a. Finance leases -
1.2 n.a. n.a.
Total gross revenues
419.2 383.9 -8.4%
(+1.1% excluding impact of healthcare
sale)
+1.8%
Like-for-like, the performance achieved reflects the
gradual improvement in the real estate environment on the Group’s
preferred markets. The quarter-on-quarter trends show a continued
improvement. Like-for-like growth came to +1.8% at end-September,
up from +1.6% for the first half of the year and +1.0% for the
first quarter of 2017. This improvement primarily factors in the
letting of buildings that were partially or completely vacant over
the past 12 months, as well as a slightly higher level of
indexation (+0.4% versus +0.3% at end-June 2017), and the positive
although still moderate reversion recorded (+0.2%).
On a current basis, the -9.6% contraction principally
reflects the healthcare portfolio’s sale at the start of the second
half of 2016, as well as the offices and residential assets sold
mainly in 2016 (with an average premium of around +15% versus their
latest appraisal values), and the launch of work to redevelop
office buildings with strong potential for creating value when
their current tenants leave. In 2016, Gecina incorporated seven new
development projects into its pipeline, including five from within
the Group’s portfolio.
Excluding the impact of the healthcare portfolio’s sale, rental
income is up +1.1%. This performance indicates that the loss of
rent resulting from the sales completed over the past 12 months
(-€8.8M) and the launch of work to redevelop buildings with strong
value creation potential (-€22.4M) is already being offset by the
dynamic like-for-like performance, the impact of development
projects delivered during the year (+€12.3M) and the first impacts
of Eurosic’s integration.
Offices: positive trends for offices in the most central
sectors
Gross rental income - Offices Sep 30, 16 Sep 30, 17
Change (%) In million euros
Current basis Like-for-like
Offices
283.8 285.0 +0.4%
+2.3% Paris CBD - Offices 79.9 82.7 +3.5% +2.5% Paris
CBD - Retail units 27.0 26.3 -2.5% -1.9% Paris non-CBD 35.1 39.2
+11.8% +0.1% Western Crescent - La Défense 115.1 100.8 -12.4% +4.1%
Other Paris Region 23.7 26.6 +11.9% +1.4% Regions (incl.
international) 3.0 9.4 ns +0.8%
Like-for-like office rental income is up +2.3% in line
with the Group’s expectations, building on the progress from the
previous quarters (+2.1% at end-June and +1.2% at end-March 2017).
This increase reflects the improvement in the financial occupancy
rate, particularly with Pointe Métro 2 let to CREDIPAR and Le
Cristallin to the Renault Group. On a like-for-like basis, it also
reflects the positive impact of an increase in indexation over the
last few quarters (+0.5%) and a positive although still moderate
level of reversion (+0.2%), but this progress has been generated
mainly by the Paris Region’s most central sectors.
This performance is being driven primarily by the most central
sectors, where market trends are favorable, particularly Paris’ CBD
(+2.5%) and the Western Crescent (+4.1%). Moreover, the -1.9%
like-for-like contraction for the retail unit portfolio is linked
to a re-scaling of rent in the previous year. Restated for this
element, like-for-like growth comes out at +1.4%.
On a current basis, rental income from offices is up
+0.4% to €285.0M.
Excluding like-for-like growth and Eurosic’s integration, this
increase on a current basis reflects the impact of the changes in
scope (acquisitions and sales) and the movement of assets within
the pipeline (deliveries and redevelopments).
More specifically, the mainly temporary loss of rent
(-€27.1M) is linked to the launch of work to redevelop office
buildings with strong value creation potential (including
Octant-Sextant in Levallois, Neuilly-Graviers, Paris-Ville l’Evêque
and Paris-Le France) for -€22.4M, as well as the impact of sales
from 2016 for -€4.7M (Vinci-Rueil, Dassault-Suresnes and
Paris-Bourse).
This loss of rent has been offset by +€22.8M of rental
income from assets recently acquired (Adamas-La Défense,
Paris-Guersant 2, Paris Courcelles) or delivered (Paris-55
Amsterdam and Lyon-Gerland) for +€6.3M, in addition to Eurosic’s
integration (+€16.5M).
Gecina’s preferred sectors are still seeing positive market
trends
Following a slight contraction in the second quarter, trends
were much more positive in the third quarter, making it possible to
maintain take-up levels from the previous year for the Paris Region
(+2% at end-September).
This performance reflects the significant upturn for the Western
Crescent in particular (+54% to 509,400 sq.m). The slight drop
in take-up levels for Paris City (-7%) mainly factors in the lack
of immediate supply available, down -11% year-on-year (-28% for the
CBD), in line with the shortage at the heart of the capital
(vacancy rate of 3.1%). Take-up in Paris’ CBD has been maintained
in line with the levels from last year faced with a sharp drop in
supply, reflected in particularly solid trends. As a result, rental
values are up at the heart of Paris (+6% year-on-year for new or
redeveloped properties, source: Cushman & Wakefield), while
remaining stable for peripheral sectors, although certain parts of
the Western Crescent and especially the Southern Loop
(Boulogne-Billancourt and Issy-les-Moulineaux) seem to be showing
preliminary signs that rental values are set to climb.
Diversification portfolios: rental resilience and impact
of sales programs
For the traditional residential portfolio, rental income
is stable at end-September 2017 on a like-for-like basis (+0.1%).
On a current basis, the -4.5% contraction factors in the program to
sell apartments on a unit basis when they become vacant as tenants
naturally free up assets (Hopper program).
Rental income from student residences shows a significant
like-for-like increase (+2.9%) linked primarily to the ramping up
of a residence in Bordeaux, delivered in the second half of 2015.
On a current basis, the +4.2% increase also factors in the delivery
of two residences in summer 2017 in Marseille and Puteaux.
Rental income from other business, generated by assets
acquired through Eurosic (commercial premises, logistics units,
youth hostels, etc.), represents €1.4M of rent over the
consolidation period.
Other gross revenues: hotels and real estate finance
lease business
The hotel portfolio has generated €3.7M of gross revenues
since Eurosic’s integration, with an operating margin of €1.3M.
However, the consolidation period is still insufficient to estimate
that this level of margin reflects a trend for the full year.
The finance lease portfolio generated €1.2M of gross
revenues over the same period, with an operating margin of nearly
100%.
Occupancy rate stable and still high
The Group’s average financial occupancy rate is still
very high, with 95.6% at end-September 2017. Overall, this rate is
stable year-on-year, with a very slight increase for offices and a
slight contraction for the diversification portfolios. For the
student residence portfolio, the slight drop is mainly linked to
the delivery of two residences in summer 2017. At end-September,
the Group’s average occupancy rate included the Eurosic scope for
just one month. This integration made a negative contribution to
the calculation for the Group’s average financial occupancy rate
for -0.1 pts. For the Eurosic scope on its own, it represents
92.9%
Average financial occupancy rate Sep 30, 16 Dec 31,
16 Mar 31, 17 Jun 30, 17 Sep 30, 17
Offices 95.5% 95.5%
95.4% 95.5% 95.6%
Diversification 97.0% 95.6% 95.8%
95.5% 95.4% Traditional residential 96.9% 96.6% 96.2%
96.4% 96.6% Student residences 87.2% 89.1% 93.5% 90.1% 88.9% Other
business (incl. healthcare in 2016) 100.0% 100.0%
- - 94.2% Group total (reported) 96.0%
95.9% 95.5% 95.5% 95.6%
Group
total (excl. healthcare)
95.5%
95.5% 95.5% 95.5%
95.6%
Lettings: a particularly dynamic year
The third quarter of 2017 followed on from a particularly
dynamic first half of the year in terms of lettings. Since the
start of the year, Gecina has let, pre-let, relet or renegotiated
nearly 116,000 sq.m, with the volume of lettings for the first nine
months already more than 60% higher than the volume recorded for
the full year in 2016.
Including the transactions for Eurosic’s portfolio, the volume
of transactions for the Group’s scope represents nearly 197,000
sq.m (close to €76M of headline rent) for the full year in 2017,
with 143,000 sq.m if Eurosic is only factored in since the date of
its consolidation in Gecina’s accounts (i.e. August 29, 2017).
The main transactions completed since the start of the year
concern the Gecina scope (116,000 sq.m), with vacant buildings such
as Dock-en-Seine in Saint-Ouen (9,000 sq.m) or Le Cristallin in
Boulogne (11,600 sq.m), development programs such as Octant-Sextant
in Levallois (28,500 sq.m), Sky 56 in Lyon-Part Dieu and several
buildings in Paris - 20 Ville l’Evêque and Paris-Guersant – as well
as certain buildings delivered recently such as 55 Amsterdam.
For the Eurosic scope (81,000 sq.m), the main transactions
include a previously vacant building in Toulouse-Blagnac (15,500
sq.m) and progress made with letting a building delivered recently
in Lyon (Terralta) for nearly 3,700 sq.m.
Development projects: acceleration of deliveries for end-2017
and 2018
At end-September 2017, the combined pipeline for committed
projects represents €2.5bn on a Group share basis
(€2.8bn total share), with an expected average yield on
delivery of around 5.6%. It is nearly 40% pre-let despite the
delivery of six projects, with 96% of their space let since the
start of the year. 93% of the controlled pipeline is concentrated
in Paris City and the Western Crescent’s best commercial sectors
(La Défense, Neuilly, Levallois, Issy les Moulineaux).
The total combined pipeline at end-September – including
controlled but not committed projects – represents nearly €4.8bn
on a Group share basis (€5.1bn total share), with an
expected yield on delivery of around 5.9%.
Six assets representing almost 50,000 sq.m have already been
delivered since the start of the year, including four from
Gecina’s previous scope (Paris-55 Amsterdam, Lyon-Gerland and two
student residences in La Défense and Marseille) and two from
Eurosic’s previous scope (City Zen in Lille and Rue de Londres in
Paris’ CBD). 96% of the space in these buildings has been let.
Four office projects representing nearly 33,000 sq.m are
scheduled for delivery before the end of 2017 (Paris-Le Jade,
Toulouse-La Plaine H, Pantin-Manufacture and 141 Hausmann), with
11 programs to be delivered in 2018, primarily in Paris
City. These deliveries of office buildings expected
between now and the end of 2018 represent more than 260,000
sq.m and over €100M of potential annualized rental
income.
Portfolio rotation: €189M of sales and €313M of
investments
€138M of residential asset sales finalized at end-September
2017
Gecina has finalized €138M of residential asset sales, with
€100M on a vacant unit basis and close to €39M of block sales.
These sales have achieved an average premium of nearly +24%
compared with their appraisal values, while the loss of rental
income represents just over 3%. In addition, €26M of vacant unit
sales were under preliminary agreements at end-September 2017.
€51M of sales completed since end-August and €29M under
preliminary agreements at end-September from Eurosic
Since Eurosic’s consolidation in Gecina’s accounts, nearly €51M
of assets have been sold, achieving an average premium of +9%
compared with their appraisal values from end-June 2017. This
primarily concerns an office building in Paris’ 17th
arrondissement. Alongside this, over €29M of property sales are
still covered by preliminary agreements, based on prices that are
once again higher than the latest appraisals.
New acquisitions for €142M of buildings since the start of the
year
Since the start of the year, Gecina has acquired two buildings
for a total of €142M. In this way, the Group acquired a building
with nearly 5,000 sq.m on Rue de Courcelles in Paris’ CBD for
almost €63M. This building is adjacent to a 20,000 sq.m building
that is already owned by Gecina, opening up possibilities for
extensive real estate synergies.
At the start of the third quarter, Gecina also finalized its
acquisition of a 10,500 sq.m building in La Défense for €78.5M,
with an immediate net yield of 5.7%. This property in the ZAC
Danton development zone is located very close to various buildings
already owned by Gecina.
€121M of investments paid out with the pipeline (exclusively for
Gecina’s scope)
€121M have been paid out to drive progress with the committed
pipeline, with 94% focused on moving forward with office projects
in Paris, Levallois, Neuilly, Issy-les-Moulineaux and Lyon
Part-Dieu, and the rest concerning a student residence project. For
the combined committed pipeline at end-September 2017, the
outstanding Group share represents €146M to be paid out in the last
quarter of 2017, €334M in 2018 and €30M in 2019.
Other information for the third quarter of 2017
Eurosic’s integration: progress to date and indicative
schedule
On August 29, 2017, Gecina finalized its acquisition of blocks
of Eurosic securities, taking its interest up to 85%. Following
this transaction, Gecina opened an offer for Eurosic targeting its
remaining capital, offering a cash option and an exchange option
based on Gecina securities. In accordance with the agreement signed
on June 21, 2017, Eurosic’s main shareholders tendered their
securities that had not yet been sold for the exchange offer. This
public offering, closed on October 11, 2017, has taken Gecina’s
stake in Eurosic’s capital up to 99.8% today (based on Eurosic’s
capital excluding treasury stock and diluted to factor in OSRA
subordinated redeemable bonds).
As announced previously, Gecina will therefore be carrying out a
mandatory withdrawal and delisting process for Eurosic, which is
expected to be completed before the end of October.
Appointment of an observer for Gecina’s Board of Directors
The Board of Directors has decided to appoint an observer whose
presence could further strengthen the Company’s governance with a
view to ensuring compliance with the articles of association and
the Board’s bylaws, in addition to providing insights and
presenting observations to the Board of Directors or the General
Shareholders’ Meeting. Following Mr Bernard Carayon’s appointment
in this role, the Board of Directors will be able to benefit from
his banking, risk management, CSR and asset management expertise.
Mr Bernard Carayon is currently retired and has a non-salaried
advisory position with Amundi’s executive leadership team.
Sylvain Fortier joined the Board of Directors on October 16,
2017 as Ivanhoé Cambridge’s permanent representative, replacing Mr
William Tresham.
A third “Secondesk” to open in Neuilly in 2018
In line with the ambition mapped out by Gecina to establish its
leadership for innovation and specifically new office uses, the
Group has decided to open a third coworking space in Neuilly
(following La Défense-Colombes and Paris CBD-Villiers), which will
be operated by its subsidiary Secondesk. It will offer 1,600 sq.m
and is scheduled to open in the first quarter of 2018.
2017 targets raised: solid operational performance and
accretive impacts of Eurosic’s integration
Based on the good level of the Group’s key markets, the
optimization of its liabilities and the accretive effects linked to
Eurosic’s integration, Gecina is able to raise its targets for 2017
and is now forecasting at least +6% recurrent net income growth
(+4.5% per share3) restated for the impact of the healthcare sale,
representing a minimum of €340M (€5.20 per share).
For reference, Gecina had initially announced a target for
recurrent net income excluding the impact of the healthcare
portfolio’s sale to contract by -5% to -6%.
Gecina, a leading real estate group
Gecina owns, manages and develops property holdings worth 19.5
billion euros at end-August 2017, with nearly 92% located in the
Paris Region. The Group is building its business around France’s
leading office portfolio and a diversification division made up
primarily of residential assets and student residences. Gecina has
put sustainable innovation at the heart of its strategy to create
value, anticipate its customers’ expectations and invest while
respecting the environment, thanks to the dedication and expertise
of its staff.
Gecina is a French real estate investment trust (SIIC) listed on
Euronext Paris, and is part of the SBF 120, Euronext 100,
FTSE4Good, DJSI Europe and World, Stoxx Global ESG Leaders and
Vigeo indices. In line with its community commitments, Gecina has
created a company foundation, which is focused on protecting the
environment and supporting all forms of disability.
www.gecina.fr
This document does not constitute an offer to sell or a
solicitation of an offer to buy Gecina securities and has not been
independently verified.
If you would like to obtain further information concerning
Gecina, please refer to the public documents filed with the French
securities regulator (Autorité des marchés financiers, AMF), which
are also available on our internet site.
This document may contain certain forward-looking statements.
Although the Company believes that such statements are based on
reasonable assumptions on the date on which this document was
published, they are by their very nature subject to various risks
and uncertainties which may result in differences. However, Gecina
assumes no obligation and makes no commitment to update or revise
such statements.
1 Over the first nine months of 2017, and 143,000 sq.m
including transactions on the Eurosic portfolio exclusively since
the end of August 20172 The average number of shares retained for
calculating this target factors in the change in the number of
shares resulting in particular from the capital increase carried
out in August, as well as the exchange offer for Eurosic, which
closed on October 11, 2017. This growth rate also takes into
account the adjustment factor (0.97391) linked to the capital
increase excluding subscription rights.3 The average number of
shares retained for calculating this target factors in the change
in the number of shares resulting in particular from the capital
increase carried out in August, as well as the exchange offer for
Eurosic, which closed on October 11, 2017. This growth rate also
takes into account the adjustment factor (0.97391) linked to the
capital increase excluding subscription rights.
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version on businesswire.com: http://www.businesswire.com/news/home/20171019006452/en/
GECINA CONTACTSFinancial communicationsSamuel
Henry-DiesbachTel: +33 (0)1 40 40 52
22samuelhenry-diesbach@gecina.frorVirginie SterlingTel: +33 (0)1 40
40 62 48virginiesterling@gecina.frorPress relationsBrigitte
CachonTel: +33 (0)1 40 40 62 45brigittecachon@gecina.frorArmelle
MicloTel: +33 (0)1 40 40 51 98armellemiclo@gecina.fr
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