2017 earnings significantly higher than the guidance
Gecina, Europe’s leading office REIT which offers urban living spaces (coworking, residential, student housing) always based on total return
2018 Recurrent Net Income per share to increase by +3% to +6% depending on the timeline for disposals
Bernard Michel, Chairman: “The strategic choice for a realignment around the office portfolio has been validated by the results achieved in 2017 and further strengthened thanks to the acquisition of Eurosic. In this way, Gecina will be able to continue developing its value creation approach with a total return focus, while adapting its offer in line with the challenges of the digital revolution”.
Meka Brunel, Chief Executive Officer: “2017 was marked by the acquisition and consolidation of Eurosic in a particularly buoyant market environment, in Paris’ best core sectors and particularly the major Grand Paris hubs. This operation is first and foremost a transformational operation for Gecina. This integration is further strengthening the unique features of Gecina, which is building its strategy around the deployment of new living spaces in the most central sectors within Paris and the Paris Region. It is underpinned by an acceleration of value extraction through the transformation of these living spaces with a major pipeline, and the portfolio’s rotation, as well as innovation to respond to new real estate practices such as coworking with its subsidiary Secondesk. Today, Gecina considers that its residential portfolio is also aligned with the needs of new more mobile and flexible lifestyles and the demand for central locations and scarcity, which are prerequisites for future performance, and that retaining this portfolio is relevant to complement Gecina’s specialization in urban offices. Tomorrow’s high-performance real estate will be increasingly central, but also firmly focused on services, digitalized, collaborative, fostering productivity and wellbeing, and responsible. Gecina is positioning itself upstream from this coming transformation. While the financial performances achieved in 2017 were particularly strong, the past year was a starting point for a new ambition for Gecina for the coming years, building a strategy that is effectively focused on its consumer-clients in its office and coworking properties, as well as residential and student residences, capitalizing on its specific strengths”.
1 EBITDA less net financial expenses, recurrent minority interests and recurrent tax, as defined in the accounts appended to this press release
2 Following the adjustment of the payout for preferential subscription rights linked to the capital increase from August 2017 (adjustment coefficient of 0.97391). Unadjusted data per share: Recurrent net income: €5.52, EPRA triple net NAV: €132.1, Dividend: €5.2
3 Targets updated with the reporting of business at September 30, 2017 taking into account Eurosic’s integration. Initial target published in February 2017 for the change in recurrent net income to represent -5% to -6% restated for the impact of the Healthcare sale
2017 highlights and key figures
Total return of +23% (4) over one year
- Triple net NAV up +18.9% (5) year-on-year to €152.9 per share reflecting the upturn on the rental markets combined with a further compression of capitalization rates and the continued value extraction from assets under development, as well as the capital gains from sales during the year
- Portfolio value up +11.8% like-for-like
Recurrent net income exceeds the guidance, driven by Eurosic’s integration, the real estate markets and the optimization of financial expenses
- Recurrent net income up +4.6% to €363.5m, or +1.3% (5) per share, with per share growth of +9.4%5 restated for the healthcare sale, higher than Gecina’s initial expectations
- Rental income for offices up +2.5% like-for-like
- Reduction in the average cost of debt by -50bp to 1.7% (including cost of undrawn credit lines) and average maturity up to 6.9 years
Performance enabling Gecina to propose a dividend of €5.30 for 2017
Value creation drive ramped up with Eurosic’s integration
- €2.8bn of operations already committed to, up +85%, representing nearly €160m of potential rental income. 12 programs completions expected for 2018, mainly in the second half of the year, representing over €115m of potential rental income, with 44% already pre-let, and 56% factoring under discussions
- €2.4bn of additional potential operations over the medium and long term, taking the total pipeline up to €5.2bn, with 70% located in Paris, delivering an expected yield on cost of 6%.
- Portfolio rotation ramped up, with €655m of commercial asset sales completed or secured to date. 12.5% premium versus the appraisal values, for the assets sold or under preliminary agreement, with 66% from Eurosic’s scope
- Operational and financial synergies now expected to exceed €30m, compared with over €17m initially
Residential portfolio repositioned at the heart of the Group’s strategy
- Residential portfolio retained within the Group, complementing Gecina’s profile as an urban office specialist.
- Three key areas for creating value identified:
- Capitalizing on the residential portfolio’s focus on central sectors to identify opportunities for real estate investments
- Optimizing operational management: capturing the reversion potential identified and improving the rental margin
- Innovate, create, anticipate: developing new markets supporting the transition to a service-driven economy for urban real estate
Model further strengthened, looking ahead 2018 with confidence
- 2018 will be marked by an acceleration in the volume of completion, mainly during the second half of the year, as well as the sales announced following Eurosic’s acquisition. By the end of December 2017, €571m of sales had already been completed or secured. Based on the working assumption for an additional volume of sales of €1.2bn in 2018, recurrent net income (Group share) per share is expected to increase by +3% to +6% depending on the execution timeline.
4 Total real estate return (growth in triple net NAV cum dividend) factoring in the adjustment of the payout for preferential subscription rights linked to the capital increase from August 2017 (adjustment coefficient of 0.97391)
5 Following the adjustment of the payout for preferential subscription rights linked to the capital increase from August 2017 (adjustment coefficient of 0.97391)
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