Milan, 15 June 2021 Italian Equity Research – New Coverage
ABITARE IN OUTPERFORM Sector: Consumers Price: Eu58.00 - Target: Eu74.50 At Home With Innovation An innovative player in the Milanese residential arena: AbitareIn specialises in the Carlo Maritano +39-02-77115.358 development of residential property projects via an innovative operational strategy [email protected] and extensive use of technology. The company carries out urban redevelopment projects that involve the purchase and subsequent demolition of disused or abandoned properties in the City of Milan, so as to build new housing complexes on the cleared land and sell residential units directly to private customers, in particular Stock Rating families seeking to buy their own home. Unlike other sector operators, the company Rating: OUTPERFORM (New Coverage) focuses exclusively on the activities with the highest added value in the value chain, Target Price (Eu): 74.50 (New Coverage) while outsourcing less profitable activities (construction). Technology as an enabler to offer tailor-made solutions: AbitareIn differs from other firms on the market due to the very high degree of product customisation to ABITARE IN - 12M Performance meet customer requirements, made possible by the high degree of innovation the company offers, from its IT-driven production process using the Building 60 Information Modelling (BIM) software platform to advanced customer management thanks to the Salesforce CRM platform, which enables computerised management 55 of marketing and sale activities. In addition, the company reacted to the outbreak
50 of the pandemic by further accelerating the adoption of innovative technologies, which led to the launch of the new e-commerce platform in 2020, which offers the 45 client an increasingly secure, informed, and complete buying experience.
40 Why Milan? To date, AbitareIn has focused its business solely on the Milan residential market (although entry into new markets cannot be ruled out in the 35 future) due to its dynamism and constant evolution. Indeed, in the 5 years prior to g-20 a-20 o-20 d-20 f-21 a-21 Covid-19, the property market in the City of Milan followed a positive trend, mainly due to the steady rise in the population, which led to a 30% increase in prices per ABITARE IN ABITARE IN Rel. to FTSE All Shares (Reb.) m2 in 5 years and a steady rise in transactions, at an average rate of 10% per year between 2014 and 2019. Naturally, between 2020 and the start of 2021, the Milan Stock Data property market, like the national one, was hit by the outbreak of the pandemic, Reuters code: ABT.MI but data starting from 2H20 show the resilience and responsiveness of the sector to the crisis. Milan remains one of the cheapest global financial centres for residential Bloomberg code: ABT IM real estate and expected demographic and economic trends suggest a robust Performance 1M 3M 12M recovery in demand for new homes in the coming years. [email protected] Absolute 12.8% 19.3% 45.4% Initiating coverage with an OUTPERFORM recommendation; target Eu74.5. We Relative 8.6% 11.7% 8.3% appreciate AbitareIn, as the company stands out from the crowd thanks to its 12M (H/L) 58.00/39.00 unique offering and propensity for technological innovation in a sector typically 3M Average Volume (th): 3.35 anchored in tradition. We believe the company’s solid pipeline (the Group is the owner or promissory purchaser of areas totalling 251,000m2) puts it in a good Shareholder Data position to take advantage of the recovery in demand after the setback caused by No. of Ord shares (mn): 3 the outbreak of the pandemic. We begin our coverage with a target price of Eu74.5, partially factoring in the expected boost from the launch of the Homizy project Total no. of shares (mn): 3 which we believe is not currently incorporated in the market price. Our target offers Mkt Cap Ord (Eu mn): 150 29% upside to the current price, dictating an OUTPERFORM rating. Total Mkt Cap (Eu mn): 150 Mkt Float - Ord (Eu mn): 66 Mkt Float (in %): 44.0% Key Figures & Ratios 2019A 2020A 2021E 2022E 2023E Main Shareholder: Sales (Eu mn) 45 73 125 176 195 EBITDA Adj (Eu mn) 11 9 27 46 51 Gozzini Luigi Francesco 23.2% Net Profit Adj (Eu mn) 6 9 17 30 34 EPS New Adj (Eu) 2.496 3.546 6.583 11.682 13.005 Balance Sheet Data DPS (Eu) 0.000 0.000 0.000 0.000 0.000 Book Value (Eu mn): 75 EV/EBITDA Adj 12.1 15.3 6.1 4.0 3.5 BVPS (Eu): 29.08 EV/EBIT Adj 12.7 16.8 6.3 4.1 3.6 P/BV: 2.0 P/E Adj 23.2 16.4 8.8 5.0 4.5 Net Financial Position (Eu mn): -13 Div. Yield 0.0% 0.0% 0.0% 0.0% 0.0% Enterprise Value (Eu mn): 163 Net Debt/EBITDA Adj 2.8 3.0 0.5 0.7 0.6
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Intermonte SIM S.p.A. Milan 20122 (Italy) - Galleria de Cristoforis, 7/8 - phone: +39-02-77115.1 - fax: +39-02-77115.300 New York (US) - Brasil Plural Securities LLC - 545 Madison Av. 8th Floor, NY 10022 –phone: +1 212 388 5600 www.intermonte.it
Disclosure time 15/06/2021 07:40:29 ABITARE IN – Key Figures Profit & Loss (Eu mn) 2018A 2019A 2020A 2021E 2022E 2023E Sales 49 45 73 125 176 195 EBITDA 4 11 9 27 46 51 EBIT 4 11 8 26 45 50 Financial Income (charges) -0 -1 -2 -2 -2 -2 Associates & Others 0 0 5 0 0 0 Pre-tax Profit 4 9 11 24 43 48 Taxes -1 -3 -2 -7 -13 -14 Tax rate 30.1% 32.6% 18.1% 30.0% 30.0% 30.0% Minorities & Discontinued Operations 0 0 0 0 0 0 Net Profit 3 6 9 17 30 34 EBITDA Adj 4 11 9 27 46 51 EBIT Adj 4 11 8 26 45 50 Net Profit Adj 3 6 9 17 30 34 Per Share Data (Eu) 2018A 2019A 2020A 2021E 2022E 2023E Total Shares Outstanding (mn) - Average 3 3 3 3 3 3 Total Shares Outstanding (mn) - Year End 3 3 3 3 3 3 EPS f.d 1.001 2.496 3.546 6.583 11.682 13.005 EPS Adj f.d 1.001 2.496 3.546 6.583 11.682 13.005 BVPS f.d 15.970 18.580 22.496 29.078 40.760 53.765 Dividend per Share ORD 0.000 0.000 0.000 0.000 0.000 0.000 Dividend per Share SAV 0.000 0.000 0.000 0.000 0.000 0.000 Dividend Payout Ratio (%) 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Cash Flow (Eu mn) 2018A 2019A 2020A 2021E 2022E 2023E Gross Cash Flow 6 7 10 18 31 35 Change in NWC -35 -28 -4 -3 -51 -30 Capital Expenditure -6 -3 -1 -1 -1 -1 Other Cash Items 0 0 0 0 0 0 Free Cash Flow (FCF) -35 -23 5 13 -21 4 Acquisitions, Divestments & Other Items 0 -0 -4 0 0 0 Dividends 0 0 0 0 0 0 Equity Financing/Buy-back 26 0 5 0 0 0 Change in Net Financial Position -9 -23 6 13 -21 4 Balance Sheet (Eu mn) 2018A 2019A 2020A 2021E 2022E 2023E Total Fixed Assets 7 9 11 11 12 12 Net Working Capital 47 74 78 82 133 162 Long term Liabilities -4 -4 -5 -5 -5 -5 Net Capital Employed 50 79 84 88 139 169 Net Cash (Debt) -9 -32 -26 -13 -34 -30 Group Equity 41 47 58 75 106 139 Minorities 0 0 0 0 0 0 Net Equity 41 47 58 75 105 139 [email protected] Enterprise Value (Eu mn) 2018A 2019A 2020A 2021E 2022E 2023E Average Mkt Cap 79 105 110 150 150 150 Adjustments (Associate & Minorities) 0 0 0 0 0 0 Net Cash (Debt) -9 -32 -26 -13 -34 -30 Enterprise Value 88 137 136 163 184 180 Ratios (%) 2018A 2019A 2020A 2021E 2022E 2023E EBITDA Adj Margin 8.7% 25.5% 12.1% 21.5% 26.1% 26.2% EBIT Adj Margin 8.3% 24.2% 11.1% 20.8% 25.6% 25.7% Gearing - Debt/Equity 21.5% 67.4% 44.8% 16.9% 31.8% 21.4% Interest Cover on EBIT 9.5 7.9 3.9 15.3 24.9 24.3 Net Debt/EBITDA Adj 2.1 2.8 3.0 0.5 0.7 0.6 ROACE* 13.2% 16.8% 9.9% 30.1% 39.6% 32.5% ROE* 9.7% 14.4% 17.5% 25.7% 33.6% 27.6% EV/CE 2.8 2.1 1.7 1.9 1.6 1.2 EV/Sales 1.8 3.1 1.9 1.3 1.0 0.9 EV/EBITDA Adj 20.7 12.1 15.3 6.1 4.0 3.5 EV/EBIT Adj 21.6 12.7 16.8 6.3 4.1 3.6 Free Cash Flow Yield -23.0% -15.2% 3.6% 8.9% -13.9% 2.5% Growth Rates (%) 2018A 2019A 2020A 2021E 2022E 2023E Sales 429.4% -9.1% 64.0% 71.1% 40.4% 11.2% EBITDA Adj 79.1% 166.5% -22.2% 203.5% 71.0% 11.3% EBIT Adj 74.7% 164.6% -25.1% 221.5% 73.0% 11.5% Net Profit Adj 125.8% 149.3% 44.3% 85.7% 77.5% 11.3% EPS Adj 125.8% 149.3% 42.1% 85.7% 77.5% 11.3% DPS *Excluding extraordinary items Source: Intermonte SIM estimates
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Disclosure time 15/06/2021 07:40:29 Contents The company at a glance ...... 4 SWOT Analysis ...... 6 Company Structure ...... 7 Shareholding ...... 8 Management ...... 8 Stock Grant ...... 9 Business Model ...... 10 Phase 1: “Land Development” ...... 10 Phase 2: Commercialization ...... 11 Phase 3: Construction ...... 12 Phase 4: Handover ...... 13 Reference Market ...... 14 Why Milan? ...... 17 One of the cheapest global financial centres for residential real estate ...... 17 Growing population ...... 18 Dynamic economy ...... 19 Projects ...... 20 Completed ...... 20 Ongoing ...... 21 Pipeline ...... 25 Porta Romana ...... 25 Lambrate ...... 26 Homizy ...... 26 Company Strategy ...... 28 [email protected] Estimates ...... 30 Valuation ...... 32 Appendix: ESG Key Questions ...... 34 Appendix: Sector Peers ...... 35
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The company at a glance
AbitareIn specialises in the development of residential property projects via an innovative operational strategy in terms of the way in which projects are completed and housing units sold. To date, the Group has worked exclusively within the bounds of the City of Milan, although it does not rule out considering projects in other areas in the future. The company carries out urban redevelopment projects that involve the purchase and subsequent demolition of disused or abandoned properties in the City of Milan, so as to build new housing complexes on the cleared land and sell residential units directly to private customers, in particular families seeking to buy their own home. AbitareIn differs from other firms on the market due to the very high degree of product customisation to fulfil customer requirements: on purchasing their home, not only can the customer choose flooring, wall finishes, and heating/air conditioning systems, but also change the disposition of the interior space on the basis of living needs (within the limits imposed by the overall project design, building regulations and town planning). All this is possible thanks to the high degree of innovation the company offers, from the IT-driven production process using the Building Information Modelling (BIM) software platform, which includes all the technical information on the building and its various parts, to advanced customer management thanks to the Salesforce CRM platform, which enables computerised management of marketing and sale activities. Furthermore, the Group has launched a revolutionary e-commerce platform that offers the client an increasingly secure, informed, and complete buying experience. This tool, which is a totally new departure in the property arena due to the degree of detail provided, the unprecedented user experience and the 360° integration with company processes, envisages the use of extremely advanced technology and solutions: from artificial intelligence in the form of a virtual assistant available 24/7, to an online configuration tool for apartments (similar to those available in the auto sector); from the possibility of remote visits to the initiative’s showroom through virtual reality to videoconferencing appointments; from the digitalization of all steps in the documentation and contractual process to the possibility of making all payments online. Focusing its activities on a specific type of product and clientele, AbitareIn has built up major experience in its chosen field since 2015. It is worth noting that the property market is cyclical and characterised by phases in which prices per square metre(m2) and/or the number of property transactions rise, periods of stability for these factors, and periods when prices per m2 and the number of transactions decline. Looking at the period before and after the 2008 financial crisis, the number of real estate transactions in the City of Milan went from 25,000 between 2005 and 2006 to 14,600 in 2012, a drop of 41% in 6 years. In the 5 years prior to Covid-19, the property market in the City of Milan followed a positive trend, mainly due to the steady rise in the population, which led to a 30% increase in prices per m2 in 5 years and a steady rise in transactions, at an average rate of 10% per year between 2014 and 2019. Naturally, between 2020
and the start of 2021, the Milan property market, like the national one, was hit by the difficult state of the [email protected] world economy due to the ongoing public health emergency and, largely for operational reasons due to the suspension of many business activities and restrictions imposed to curb the spread of pandemic, recorded a sharp drop in the number of transactions (-19% per annum compared to 2019). Group clientele is mainly composed of families, and in particular people already resident in the areas where property development initiatives are carried out, who are seeking to buy their own property. AbitareIn’s objective, in identifying a target clientele for each property development initiative, is to match the lifestyle of potential purchasers as closely as possible with the socio-demographic trends of the micro-zone where the development is located. Most promotional and advertising activities (e.g. leafletting, billboards, etc.) are performed within a radius of 1km as the crow flies from the location of the property development initiative because such developments are aimed squarely at existing residents of the area. Regarding communication and marketing, it is worth noting that the latest campaigns have been carried out exclusively through social media (Facebook, Instagram, etc.). The issuer carries out most of its property initiatives in areas just outside the centre of Milan, which are held to be of most interest in terms of growth and development, with the potential for realising residential property developments in line with the target market at prices of Euro 3,500 to 5,000 per m2. The areas in which zones are selected for residential property development are chosen on the basis of the socio- economic fabric, demographics and the relationship between supply and demand. The choice of an area is the result of a careful selection process from a portfolio of opportunities drawn up by the Issuer’s property research and analysis department following an extended monitoring process.
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Ongoing projects and pipeline
Source: Company presentation
Regarding the wider planning of future property projects, the Group is the owner or promissory purchaser, through binding agreements, of areas totalling 251,000m2, or c.2,738 medium-size residential units of 92m2 each. The number of housing units actually built and contracts signed, notwithstanding the overall surface area, may vary depending on personalisation and specific features of the various lots. Once the area in which the property development initiative will take place has been chosen, legal entitlement arising from the preliminary agreements pertaining to disposal of the area itself are vested in a legal entity, the Operational Vehicle (OV), whose share capital is entirely held by the Issuer. Through intragroup service contracts, the issuer provides each OV with the consultancy and services required for development of the initiative (e.g. help with planning, coordination, commercialisation and customer management, as well as administration management). The OV then proceeds, among other things, with purchase of the buildable area, and with signing of all contracts for the development and realisation of the property development initiative and for the commercialisation of the residential units. [email protected] Furthermore, the group intends to develop the Homizy project, offering functional and on-trend housing solutions through a co-living formula. By exploiting economies of scale and its own market expertise, the company intends to develop high-quality new-build products with original design features. The company’s business plan (and our estimates) does not factor in the launch of this new line of business, which should therefore be viewed as a supplementary opportunity.
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SWOT Analysis
Strengths Weaknesses Strong expertise in the Milan market Project duration Innovative business model that allows clients to customise their High volatility of consolidated results depending on the progress apartments of the various projects Scalable model allowing for significant economies of scale Lack of geographical diversification Robust pipeline ensuring visibility for the next years Robust project pipeline that assures a high degree of visibility on developments in the coming years
Opportunities Threats Favourable demographic and economic trends in Milan Rising land prices High availability of land Increasing construction costs Increase in selling prices Increase in interest rates Entry into the rent market through Homizy Delay in projects that may be caused by constructor or length of public administration approval processes Change in customers’ habits
Source: Intermonte SIM
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Company Structure
AbitareIn has a distinctive organizational structure, with each development project allocated to separate Operational Vehicles that own the property, which are independent from one another, in such a way that any unforeseen circumstances or problems (i.e. delays, legal disputes) in one project do not have any repercussions for the others. This corporate structure also provides more transparent results and faster completion of the property development initiative. Under this format the Issuer has the know-how and personnel with the appropriate expertise to execute the property development initiative. Through service contracts, the Issuer provides each Operational Vehicle with the consultancy and services required for development of the initiative. By way of an example, the service contracts signed between the Issuer and the Operational Vehicle cover help with planning, coordination, commercialization and customer management, as well as administration management. The amount paid to the Issuer for these activities is comprised of: (i) a set-up fee for feasibility studies and market analysis, the definition of the business plan and the planning of the property development initiative; (ii) a fee for the marketing campaign; (iii) a sum for assistance with the deeds of sale; and (iv) a variable fee calculated on the amounts coming from the preliminary sales contracts signed between the Operational Vehicle and the end customers. Liquidity for the Operational Vehicle, when not provided by the banking sector, comes from the Issuer, which supplies the amount required for the property development through interest-bearing loans.
Company structure [email protected]
Source: AbitareIn
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Shareholding
Ordinary shares in AbitareIn were listed for trading on AIM Italia, the Italian Stock Exchange’s alternative investment market, on 8 April 2016; the subsequent translisting to the MTA STAR segment was completed on 1 March 2021. The share capital currently consists of 2,593,538 ordinary shares (25,935,380 after stock split), 23.2% of which are owned by Luigi Francesco Gozzini and 18.2% by Marco Claudio Grillo, respectively chairman and CEO as well as joint founders of the company. Gaudenzio Roveda and Kairos own 10.05% and 5.83% respectively, completing the picture. The free float thus represents ~42.7% of capital.
Shareholding structure
Gozzini Luigi Francesco, 23.21%
Market, 42.72%
Grillo Marco Claudio, 18.2%
Kairos Partners, 5.8% Gaudenzio Roveda, 10.1%
Source: Company data
Management Luigi Francesco Gozzini (Chairman): Born on 28 January 1967 in Bergamo, following a degree in Information Science at Milan University and a Master in Business Administration (MBA) at Milan’s Bocconi University, he became an Associate Consultant at McKinsey. Experience in the financial sector was gained at the Ministry of Finance, Unicredit, San Paolo di Brescia and Banca Popolare di Brescia. Gozzini took part in the Cariplo- Banco Ambrosiano Veneto merger that brought Banca Intesa into being. [email protected] Between 1993 and 1995 he worked at SGS in Thomson in Bristol and Grenoble before returning to Catania, in Italy, as a Project Manager. He was a founding shareholder of Gandalf Airlines before turning his attention to the property sector through the setting-up of T Property Group and, lastly, AbitareIn. Marco Claudio Grillo (CEO): Born 4 September 1968 in Savona, he graduated with the highest mark in Information Science at Milan University. Following a period as an analyst-programmer at Siemens, in 1994 he took part in the start-up of IUnet, the first Italian ISP for the world of business, acquired by Olivetti Telemedia. In subsequent years he worked for US multinationals in the IT and networking sector (including DELL) as Country Manager for Italy, then Regional Manager for South-Europe and the Middle East. In 2005 he founded Flowinspect, where he was also CEO, a networking and security solutions start- up which in 2008 was acquired by an important US provider of security products. following the acquisition of Flowinspect, he was appointed CEO of Emaze Networks, a leading Italian specialist in IT Security which was then acquired by a German private equity fund. After overseeing, as a consultant hired by the board, the sale of Matrix S.p.A. (part of Telecom Italia) to Libero, he turned to the property sector and set up AbitareIn alongside Luigi Gozzini. Marco Scalvini (Director-General): with a degree in Electronic Engineering and an MBA from SDA Bocconi, Marco Scalvini has a similar academic background and professional knowledge of high-tech sectors (HP and Italtel) to AbitareIn founding shareholders Luigi Gozzini and Marco Grillo. He also boasts in-depth experience in residential development from almost 10 years as General Manager at Nexity, a leading international sector company listed on the Paris Exchange, and at Milan group Bluestone, specialised in residential development.
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Stock Grant On 28 April 2021, the company board resolved inter alia to call an ordinary shareholder meeting in order to seek approval for the “2021-2023 Stock Grant Plan”, and on the same date the board approved the regulations of the stock grant plan, with effectiveness of the plan conditional on approval by the shareholder meeting. The stock grant plan beneficiaries are CEOs Luigi Gozzini and Marco Grillo, and Director-General Marco Scalvini. The maximum number of shares that may be issued for the plan is 102,000/1,020,000 post- split (90k for the CEOs in 3 annual tranches, 12k for the Director-General), equivalent to 3.9% of current company share capital. The shares will be granted in 3 annual tranches on the basis of 3 components, each of which covers a portion of the total shares for assignment and the performance-related criteria that determine the grants: Component A covers 20% of the overall rights for assignment. Under the terms of Component A, entitlement to stock grants is conditional on (i) ESG reporting has been implemented for the 2021 financial year, and (ii) improvements are observed in the ESG performance for the 2022 and 2023 financial years, with the choice of metrics to be made by the board following preparation of the first Sustainability Report. Component B covers 40% of the overall rights for assignment. The entitlement to stock grants is based on the value of consolidated EBT compared to the EBT Target in the Industrial plan. Component C covers 40% of the overall rights for assignment. The entitlement to stock grants is based on achieving objectives for maintaining/increasing the development pipeline in terms of the number of standard apartments, as stipulated in the Industrial plan.
Through the 2021-2023 Stock Grant Plan, which assigns instruments representative of the value of the company in exchange for achieving performance objectives, the company aims to reward beneficiaries for focusing on factors of strategic interest, as well as encouraging loyalty and incentivising them to remain at the heart of AbitareIn. The Plan has the following main objectives: i) aligning management interests with those of shareholders; (ii) rewarding high performance, thus motivating management to increase profitability and value for shareholders; and (iii) recognising results achieved during individual financial years, setting up a direct relationship between the achievement of objectives and remuneration, stimulating motivation and the development of individual professionalism, and meaning differences in remuneration on the basis of the performances achieved.
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Business Model
The business model used by the company for each property development initiative, consists of 4 distinct phases: (i) Land Development (ii) Commercialisation, (iii) Construction, (iv) Handover. It is a tried-and-tested model, based on carefully worked out steps, whose main advantage is the ability to concentrate on commercialisation during a falling market, and to shift focus to land development during a rising market: the profitability of an operation is mainly down to two factors: the purchase price of the area in which the property development initiative is to take place and the sale price of the residential units built.
Business Model
Source: Intermonte SIM
Phase 1: “Land Development” This phase covers the search for areas, followed by the verification, management and obtaining of authorisation for realisation of the property development initiative and the planning activities. To prepare for this phase, and partly included within it, is the ongoing monitoring performed by a dedicated team. Land Development is a strategic phase of the company’s organisational model. Research and evaluation of areas is an ongoing, extensive and detailed process. AbitareIn has industrialised this process, in which it has made significant investments in recent years so as to be able to survey and evaluate more than 300 buildable areas in the City of Milan. Once identified through ongoing monitoring, the company carries out verification on areas that are potentially suitable for property development initiatives, as well as the effective feasibility of projects on such areas, their potential profitability, the execution timescale and foreseeable investment risks. Feasibility verification involves the following: i) possession of required authorisations, ii) information on provenance and ownership, iii) possession of environmental requirements, iv) urban planning and building permit status, v) existence of mortgages and financing, vi) assessment of risks according to the neighbourhood, market research and the intrinsic potential of the area. For each property development initiative, the company bears feasibility costs that have typically ranged from Eu20k to Eu100k, depending on the size of the area. On completion of verification, an in-house report is drawn up on the potential suitability of the area and its compliance with company strategy. In the event of a positive outcome, a more detailed document is produced on the various aspects of the property development initiative to be realised in the buildable area under analysis, which determines, among other things, the potential economic return and constitutes one [email protected] of the elements to use for steering and monitoring subsequent phases. The Land Development phase, which is one of the most delicate of the entire process, is carried out entirely in-house. In the event of a satisfactory outcome to the verification process, the group proceeds with the signing of preliminary contracts (generally transcribed) for the purchase of the area through the OV designated for the property development initiative or for the purchase of units in the vehicle that already owns the area, to be decided on a case-by-case basis. Depending on the agreement made with the seller, signing of the definitive contract for the purchase of the area may come either before or after completion of the full administrative process outlined below. At the same time as the purchase of the area, the OV also proceeds with the signing of the mortgage contract with the credit institution for the financing of the purchase and works for the completion of the property development initiative (on average for around 60% of the overall costs). The Land Development phase generally lasts from 6 to 24 months, depending on the type of authorisation required for completion of the property development initiative and the associated timing. For developments in excess of 20,000m2, the authorisation/ administrative process can take as long as 4 years. Upon completion of this phase, the OV dedicated to the property development initiative signs a service contract with the AbitareIn parent company through which the parent company provides the vehicle with all the required planning activities, assistance with the design, coordination and commercialisation of the residential units, client management services and finally operational management of the OV itself.
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Phase 2: Commercialization The commercialisation phase starts with marketing activity aimed at advertising the property development initiative, as well as fitting out a dedicated showroom. The commercialisation phase is carried out through advertising campaigns which, depending on the size of the project, envisage the sale of the entire housing complex or individual lots. During the commercialisation phase, the company mainly runs advertising campaigns through social media channels. In this phase the company uses the new revolutionary e- commerce platform. On average, the commercialisation phase lasts from 3 to 9 months for each campaign, within which more than one campaign may run (new campaigns can run as frequently as one every 2 months) thanks to the new e-commerce platform. The duration depends on various circumstances, such as the number and size of apartments, the target clientele and the specific zone. During this phase, the dedicated OV gathers binding purchase proposals from clients for the various residential units. When the target for the commercialisation phase is reached, the OV draws up preliminary purchase contracts with clients for the residential units in question, which are signed in front of a notary and transcribed to the relevant property registers. These contracts stipulate the release of a surety in favour of the promissory buyers guaranteeing the amounts paid in deposit or partial payment. The preliminary contract stipulates penalties for the OV in the event of delayed completion and for the buyer in the event of breach of agreed payment terms or at verification of completed works. In general, the promissory buyer will deposit a sum equivalent to 15% of the overall price of the residential unit acquired upon signing of the preliminary contract. The remainder, as stipulated in the preliminary contract, is usually paid in two tranches within 18 months of the signing of the preliminary contract (for an additional 15% of the overall price), with the balance to be paid upon notarisation of the definitive deed of sale for the purchase of the residential unit. Up to the date the frequency of payment breaches or delays on the part of the client was low, without any notable repercussions for the company. Furthermore, up to the date, there were never any cases in which the OV had resorted to legal action to enforce any specific contract. Commercialisation activity requires the involvement of a registered real estate broker as well as company personnel and partners, especially in the group’s marketing, legal, planning and architecture teams. The group therefore calls on a commercial network that works through brokerage contracts signed with highly experienced real estate brokers, remunerated through all-encompassing commissions. New e-commerce platform: AbitareIn’s vision has always been to shake up the traditional dynamics of the property market, introducing the innovation, computerisation and industrialisation that has transformed other sectors. The strategy and business model are based on huge investments in research to ensure the offer of an innovative, cutting-edge product on the market. The current backdrop, distorted by the spread of Covid, has driven the company to accelerate the research and development processes on which it had been working for some time, in order to adapt its model to new buying preferences that are taking an even stronger hold as a result of the public health emergency. The upshot of this ongoing pursuit of innovation is the launch of a revolutionary e-commerce platform that offers the client an increasingly secure, informed, [email protected] and complete buying experience. This tool, which is a totally new departure in the property arena due to the degree of detail provided, the unprecedented user experience and the 360° integration with company processes, envisages the use of extremely advanced technology and solutions: from artificial intelligence in the form of a virtual assistant available 24/7, to an online configuration tool for apartments (similar to those available in the auto sector); from the possibility of remote visits to the initiative’s showroom through virtual reality to videoconferencing appointments; from the digitalisation of all steps in the documentation and contractual process to the possibility of making all payments online.
E-commerce platform: Homepage E-commerce platform: Wishlist
Source: Company Website Source: Company Website
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E-commerce platform: Homepage E-commerce platform: Wishlist
Source: Company Website Source: Company Website
Phase 3: Construction Construction activity is outsourced by the group to third parties, through a tender contract signed with a general contractor, bearing in mind the complexity of building sector regulations, the low entry barriers and the low level of profitability. Tender contracts stipulate an overall lump sum payment, which encompasses the entire work and cannot be renegotiated. As a result, any increase in costs or other charges of any kind that are required during execution of the works are entirely shouldered by the contractor and cannot involve any increase in the initial payment. Nevertheless, we note that the company accepted an exceptional request received on 4th May 2020 from a general contractor to supplement the agreed payment amount by c.Eu1mn in order to cover the increased costs caused by the Covid-19 emergency. This was to avoid the need to replace the contractor with works almost completed, which would have incurred even higher costs and caused further delays. Payment of the agreed amount is made according to progress with construction work, based on a provisional reckoning of the percentage of works effectively completed on a monthly basis. Selection of the general contractor is based on a tender process that assesses the following requirements: High percentage of revenues deriving from residential projects; Revenues in excess of Eu30mn in the most recent financial statements;
Low percentage of revenues deriving from public works (in any case less than 20%); [email protected] High percentage and absolute amount of revenues deriving from projects realised in the City of Milan.
The payment structure, based on progress of works, and the withholdings typically stipulated in the tender contract, as well as systemic use of the Building Information Modelling (BIM) system for sharing data on construction activity, enable the group to optimise financial management and grant significant capacity to address any continuity problems encountered by construction contractors in a timely manner. Generally, construction works last from 21 to 26 months, and only get underway once the minimum sales target has been reached. Historically, construction activity has never begun prior to the signing of preliminary sales agreements for 100% of residential units in the relevant property development initiative. Each OV, with reference to its specific worksite, signs a Contractors’ All Risks (CAR) insurance policy with a leading insurer to cover the entire worksite throughout the construction phase for the property development initiative. The policy covers all damage to the works identified in the tender contract, to goods located on the worksite and caused by those working on the site, including any and all subcontractors. The group also has a number of Interior Design Partners for the supply of domestic appliances, window and door frames, doors, windows and shutters, and furnishings. The group signs contracts with these partners for the entire duration of works on a specific property development initiative, aimed exclusively at setting the price list that the supplier will apply for the general contractor or the principal without any commitment to guaranteeing a minimum purchase level for the supplier.
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Phase 4: Handover When construction activity has been completed, the OV proceeds with the handover of the residential units to the buyers following signing of the definitive purchase contracts. As the developments are not small in size, in some cases involving the construction of hundreds of apartments, management of the handover phase also involves many different company departments. The handover phase involves a wide range of activities. First and foremost, upon completion of the construction works, each buyer is called upon to verify together with the contractor the final completion of works on the residential unit, and to sign off on the final report. Subsequently, the company proceeds to schedule an appointment for the signing of the deed of sale, also managing the collection, through a personal web interface for each client, of all of the administrative and accounting documentation for each contract and forwarding it to the notary who will draw up the deed of sale. Following the signing of the definitive sale contract, the company also carries out a further inspection with the client, which will also be accompanied by a report, for the handover of the keys to the residential unit and the associated technical and administrative documentation, along with an explanation of the functions of the equipment and systems within the unit. These activities are managed and organised through the company’s Customer Relationship Manager (CRM) platform. On average, the handover phase lasts 3-4 months.
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Reference Market
Recent months have been clouded by the major uncertainty over the consequences of the pandemic on the economy, the market and the general public. We are witnessing the triggering and acceleration of trends and behaviours that were already underway, and which are now taking a firm hold, the most obvious one being the shift to smart working. Moreover, the enforced confinement at home in recent months has made house purchases, a longstanding priority for Italian families, take on even greater importance. The quality of housing, the reorganisation of living space to accommodate new demands (smart working, home schooling, etc.), the healthiness of the environment, and energy efficiency are at the heart of modern house hunting. Now more than ever, the demand for “housing products” is focused on elements that are less likely to be found in older housing but are perfectly consistent with the features of new builds, which have always been AbitareIn’s stock in trade. Families that are currently house hunting want to be able to enjoy private outdoor space, from communal gardens to loggias and terraces in apartment buildings, as well as condominium services. The opportunity to personalise the environment is an inestimable added value, while the health of the internal area and attention to the environmental impact, especially energy efficiency, are the details that make the difference. Market data show this to be the case. While figures for the last year on residential trends are not particularly significant because they are blighted by the impact of the lockdown on the process for purchasing housing, the market data laid out in the following sections seem to confirm that demand, especially for new builds, has remained solid, and the lockdown has increasingly driven buyers to seek larger residential units. The gap between supply and demand (especially for new housing) already witnessed in Milan recent years, has intensified further due to the drop in supply, mainly due to the temporary reduction in activity by major funds (especially international funds) and the inevitable slowdown in the release of building permits and planning authorisation by local authorities. Number of transactions: Covid certainly made its mark on the Italian property market in 2020, a year blighted by lockdown restrictions and economic insecurity, which led to a weak first half of the year and a recovery as of 3Q. Indeed, as noted in the Italian Tax Agency’s “Property Market Monitor” (“Osservatorio del Mercato Immobiliare”) report, YoY trends fluctuated wildly across the last quarters, which in addition to the inevitably negative impact of the lockdown measures to control the pandemic, also showed the market’s powers or rapid recovery as soon as the first prospects of economic recovery were glimpsed. Indeed, in the first quarter of 2020, the impact of the halt to economic activity in March was already starting to be seen, while the widespread decline reached its nadir during 2Q20. In 3Q20, as activity gradually resumed, the residential market reported faster-than-expected growth rates. Finally, starting from 4Q all areas of the country showed higher volumes of property transactions than in the same period of the previous year, with 1Q21 transactions even 17% higher compared to 1Q19.
Normalized number of transactions 1Q20 vs 1Q19 2Q20 vs 2Q19 3Q20 vs 3Q19 4Q20 vs 4Q19 1Q21 vs 1Q20 [email protected] North West -16.5% -26.5% 3.0% 9.4% 39.3% North East -14.1% -21.5% 1.0% 7.8% 40.5% Center -14.5% -26.3% -1.8% 12.3% 36.1% South -16.4% -33.5% 9.4% 5.6% 38.8% Islands -16.1% -34.4% 6.7% 7.3% 37.4% Italy -15.6% -27.3% 3.0% 8.8% 38.6% Source: Osservatorio del Mercato Immobiliare, Agenzia delle Entrate
The resurgence of the pandemic at the end of 2020 and during the early months of 2021 triggered a new slowdown in economic and social activity. On the other hand, the vaccination campaign, in which the entire world is putting its faith in order to resolve the crisis, seems to be well on the way to achieving the targets set. Finally, government interventions aimed at stimulating the revival of the domestic economy will be key for the property market. 2021 will therefore be an unsettled year, in which the structure of the market witnessed to date could undergo further changes, while it remains difficult to confidently forecast future scenarios and prospects. In 1Q21, transaction volumes in the residential sector continued and improved upon the positive trends already witnessed in the 4Q20, following the sharp declines recorded in 1H20. There were nearly 45k more residential property transactions than in 1Q20, +38.6% YoY. This new positive development is clearly highlighted in the historical trend showing YoY changes in the normalised number of transactions (NTN).
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Italy - Normalized number of transactions Milan - Normalized number of transactions
40.0% 40.0%
30.0% 30.0%
20.0% 20.0%
10.0% 10.0%
0.0% 0.0%
-10.0% -10.0% 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15 3Q15 1Q16 3Q16 1Q17 3Q17 1Q18 3Q18 1Q19 3Q19 1Q20 3Q20 1Q21 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15 3Q15 1Q16 3Q16 1Q17 3Q17 1Q18 3Q18 1Q19 3Q19 1Q20 3Q20 1Q21 -20.0% -20.0%
-30.0% -30.0%
-40.0% -40.0%
Source: Osservatorio del Mercato Immobiliare, Agenzia delle Entrate Source: Osservatorio del Mercato Immobiliare, Agenzia delle Entrate
Prices: further proof of the dynamism and reactivity of the Italian residential market despite Covid comes from sale prices, which on an annual basis have even increased on the previous year. According to ISTAT estimates, in 4Q20 the index of prices of houses bought by families for habitation or investment (Italian acronym IPAB) increased 0.3% on the previous quarter and 1.6% on the corresponding period in 2019. The upward trend in IPAB prices is being driven by the prices of new houses, rising at 1.7%, as well as those for existing homes, increasing at 1.4%. These trends are seen in the lively growth of sale-purchase volumes (+8.8% for the residential sector in 4Q20, following +3.0% the previous quarter according to the Property Market Monitoring Unit at the Italian Tax Agency). Average house prices increased 1.9% in 2020, with new homes up +2.1% and those for existing housing stock up 1.9% (the latter accounting for over 80% of the aggregate index). Compared to the 2010 average, the first year for which the historical IPAB series is available, in 2020 house prices fell 15.0% (-21.6% for existing stock, +3.6% for new). The projected change in the IPAB for 2021 is -0.3% (-0.6% for existing houses and +0.8% for new). In 4Q20, the house price trend on an annual basis was driven by the South of Italy and Islands (+3.0%); prices increased to a lesser degree in the North-West and in the North-East (+1.7% and +1.8% respectively) and were up only slightly in the Centre of the country (+0.2%). In 4Q20 in Milan, house prices were up, on an annual basis, by 7.4%, confirming the sustained growth, albeit down from the previous quarter (when it was +12.0%). In Turin and Rome, by contrast, housing prices fell (by 2.0% and 0.5% respectively). In 2020, the year of the Covid-19 health crisis, prices of houses purchased by families showed the largest annual average growth (+1.9%) since the first year for which the historical series of IPAB indices is available (2010). This trend occurred against a backdrop of residential sales-purchase transactions down 7.7% on 2019, confirming that housing price trends experienced only a partial and delayed response to changes in
demand. The increase is attributable to prices of both new and existing houses and was driven by the North, [email protected] while those in the South and Islands started rising again and the Centre remained practically stable.
Housing price index
Total New Homes Existing Homes
110
105
100
95
90
85
80
75 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20
Source: ISTAT
Average home size: as underlined previously, one of the impacts of the lockdown seems to be the search for larger housing solutions. Analysis of transactions in terms of house size (surface area in m2), shows trends that are not dissimilar to those already observed in terms of NTN. A total of 60mn m2 of residences were 15
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sold, down 6.5% vs. 2019, with an average surface area of 107.5m2 per transaction, which is actually higher than in 2019 (+1.3m2).
Total and average size of homes sold Surface 2020 m2 Var % surface 2019 vs Delta average surface 2020 2020/2019 in m2 North West 19,854,054 -6.3% 1.4 North East 13,182,769 -4.9% 1.7 Center 12,065,126 -6.7% 0.9 South 9,736,892 -8.0% 1.1 Islands 5,135,796 -8.0% 1.4 Italy 59,974,637 -6.5% 1.3
Source: Osservatorio del Mercato Immobiliare, Agenzia delle Entrate
In terms of YoY trends, the following table shows a more limited decline in the purchase of larger houses, - 2.9% for homes over 145m2. On the other hand, the fastest decline was recorded in the smallest class size, of residences up to 50m2, which witnessed the NTN falling 10% vs. 2019 nationally, to as much as 16.7% in the islands, largely in provincial capitals.
YoY NTN 2020/19 changes by size and geographical area up to 50m2 from 50m2 from 85m2 from 115m2 more than Total to 85m2 to 115m2 to 145m2 145m2 North West -10% -9% -8% -7% -3% -8% North East -7% -7% -10% -5% -1% -6% Center -9% -8% -10% -6% -3% -8% South -11% -9% -10% -10% -5% -9% Islands -14% -9% -10% -10% -5% -9% Italy -10% -9% -9% -7% -3% -8%
Source: Osservatorio del Mercato Immobiliare, Agenzia delle Entrate
A survey conducted by Immobiliare.it, one of the leading property websites in Italy, provides further confirmation that Italians’ preferences are changing. The purpose of the survey of over 10mn searches saved in January 2020 and in January 2021 was to see how the ideal house has evolved in response to the pandemic. It showed that the surface area of the ideal home had grown by 6.7%; remote working and study, and hobbies suitable for the home have made an extra room a necessity: if the maximum number of rooms in 2020 was 3, today it is 4. The terrace has become a must: comparing searches in January 2020 and January 2021, the number indicating a terrace as indispensable increased by 10.3%.
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Why Milan?
One of the cheapest global financial centres for residential real estate A UBS report monitoring the risk of house price bubbles in the leading European financial cities perfectly highlights why the company’s focus is on the Milan residential real estate market. Indeed, on average global prices have risen, with most European cities seemingly at risk of a bubble. The Eurozone appears to be the region in which real estate markets are overheating the most. The index scores for all Eurozone cities analysed rose over the last four quarters, with valuations already among the highest in the world. This imbalance is being exacerbated further by exceptionally low financing costs, which do not reflect the strength of the local economies. Specifically, prices in Frankfurt and Munich have more than doubled over the last decade. On the other hand, the report shows Milan as the most affordable European city, with the fairest residential real estate prices. On average, in Milan a skilled service worker needs to work 6 years to be able to buy a 60m2 flat near the city centre, compared to 17 years in Paris and 14 in London.
UBS Global Real Estate Bubble Index The number of years a skilled service worker needs to work to be able to Index scores for the housing markets of selected cities, 2020 buy a 60sqm flat near the city center [email protected]
Source: UBS Global Real Estate Bubble Index 2020 Source: UBS Global Real Estate Bubble Index 2020
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Growing population Another factor that bears out the validity of the company’s choice to concentrate on the Milan market is the increase in the city’s resident population. Indeed, in period following the 2008 financial crisis, namely 2009-2019, the number of people resident in Milan rose by 7.5% (Source: Milan City Council Integrated Statistics System - Sistema Statistico Integrato del Comune di Milano), a figure partially eroded by the decrease caused by the pandemic, which took the total increase down to 6.6%. It should be underlined that the 25-34 age range, the company’s main target audience, grew at the fastest rate, by 11.9% between 2009 and 2019 (+11.6% between 2009 and 2020).
Resident population in Milan
25-34 years old Total
114.0
112.0
110.0
108.0
106.0
104.0
102.0
100.0
98.0
96.0
94.0
92.0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: Sistema Statistico Integrato del comune di MIlano
The projections made by the Milan City Council Integrated Statistics System tell a similar story, forecasting a generalised increase in the number of residents in the coming years, with the sharpest rise coming in the 25- 34 age group. This suggests that housing demand among the company’s target clients is set to rise in the coming years.
Residents projections
25-34 years old Total [email protected]
120
115
110
105
100
95
90 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039
Source: Sistema Statistico Integrato del comune di MIlano
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Dynamic economy Before the pandemic that shook the world in 2020, Milan was delivering dynamic economic growth, as clearly shown in the table below. In 2020, however, the overall decline in Milan was without precedent, coming to -11% in terms of added value. This was a worse outcome than for Italy as a whole (-9%) or the Lombardy region (-10%), because the city and the region was at the very heart of the outbreak, with contagion spreading more widely, and because the city’s economic structure, skewed more towards services, was hit hardest by the limits on social interaction. While we remain in a period of great uncertainty, analysts all agree that 2021 will be a year of recovery, with significant growth of +5.3%, allowing at least some of the losses to be staunched. A return above pre- pandemic levels is nevertheless not forecast until 2023, although this could be accelerated by the launch of the European Recovery Plan.
Added Value (2015=100)
Source: Assolombarda, Your Next Milano 2021
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Projects
Ongoing projects and pipeline
Source: Company presentation
Completed Abitare in Poste: This was the first project completed by AbitareIn, in 2016. The residential complex is located on the site of the former East Milan distribution centre of Poste Italiane, and is part of the Ortica district. The buildings feature 6,000m2 of floor space for 81 residential units of different sizes and styles, all with double exposure, including to the south, and featuring balconies, loggias, terraces and additional facilities to complete the residential function.
Abitare In Poste Abitare In Poste [email protected]
Source: Company website Source: Company website
Abitare in Maggiolina: The project, which was completed during 2020, saw the regeneration of an abandoned area, the former headquarters of daily newspaper il Giorno, with the construction of 125 apartments on a total area of c.9.000m2. The project required a few months more than forecast due to some unforeseen elements during the land reclamation and then as a result of the pandemic, which saw additional expenses to cover the increased costs incurred by the constructor (Eu1mn), which AbitareIn accepted to pay considering the project was in its final stages and it would have made no sense to change constructor at that point.
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Abitare In Maggiolina Abitare In Maggiolina
Source: Company website Source: Company website
Abitare In Maggiolina Abitare In Maggiolina
Source: Company website Source: Company website
Ongoing Milano City Village: This project, in keeping with the spirit of urban regeneration that distinguishes AbitareIn’s initiatives, involves the construction of a new residential complex thanks to the recovery of the disused former Telecom Italia site on via Tacito, off Viale Umbria in Milan. The project envisages the complete demolition of the disused buildings and the construction of two new buildings, the City Plaza and the City Garden, in an open courtyard format. [email protected] The residential complex features an internal 6,000m2 park/garden that will create a green space on over 70% of the concreted area. The overall initiative will involve the construction of 210 residential units. Overall, the value of the preliminary contracts signed for the initiative is over Eu78mn, to which can be added the sales of the exclusive penthouse apartments and the garages that form part of the project. Completion is expected during the course of 2022.
Milano City Village Milano City Village
Source: Company Website Source: Company Website
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Trilogy Towers: The project, which will spring up in the vicinity of Piazzale Accursio in the area owned by Trilogy Towers s.r.l. (entirely controlled by AbitareIn S.p.A.) envisages the demolition of the existing disused buildings and the construction of 3 high-rise buildings surrounded by 6,000m2 of park gardens. There will be 130 entirely tailor-made residential units based on the demands of each client. The new residential development arises in an area that has already been undergoing intense regeneration and reconversion, right next to the former Milan shooting range. The business plan for the project, which is scheduled for completion in 2022, envisages Eu55mn of revenues, as announced by the company on 25th September 2019.
Trilogy Towers Trilogy Towers
Source: Company Website Source: Company Website
Palazzo Naviglio: Palazzo Naviglio will be built from a building of contemporary design, comprised of two staggered towers with spacious terraces facing the city and the canal. The construction of 76 apartments is scheduled for completion in 2023, for total revenues of c.Eu31mn.
The project is located in the historical and alluring Naviglio Grande district, packed with services and attractions, which has long been a byword for culture and leisure.
Palazzo Naviglio Palazzo Naviglio
Source: Company Website Source: Company Website
Savona 105: Located in the Navigli area, the Savona 105 project involves a site previously occupied by German company Osram. The former office building will be demolished to make way for the residential development project, as well as an extension to a neighbouring park. The project foresees the construction of 140 housing units, the first commercialisation phase of which took place in mid-2020, leading to the preliminary subscription of 40% of the total. The next phase of commercialisation is set for summer 2021, with completion of the works currently forecast for end-2023 / early 2024. Our estimate for revenues from the project is circa Eu70mn. It is worth noting that this project was the first one on which the new e-commerce platform was tested.
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Savona 105 Savona 105
Source: Company website Source: Company website
Olimpia Garden: With a private green park, just a few steps from the underground network, Olimpia Garden is the latest residence of Gruppo AbitareIn. It comprises 138 apartments across three buildings (two already completed), with a large internal garden and various communal spaces. The complex is made up of various types of apartment, all delivered on a turnkey basis, including solutions selected specially by AbitareIn’s Interior Designer to offer an energy-efficient and stylish product. Unlike AbitareIn’s standard format, the so-called “build to order” through demolition and reconstruction, the Olimpia Garden project involves the transformation of an existing property complex, which is currently in the process of being completed. The project is in an urban environment that is undergoing major development and regeneration, straddling the distributor road linking the Olympic Village, to be built in time for the 2026 Winter Olympic Games, and Palaitalia, the new Milan Arena that will be built in the Santa Giulia district. Given the differences to AbitareIn’s standard product, the Olimpia Garden project will be marketed through more traditional systems, which do not involve organised promotional campaigns or events.
Olimpia Garden Olimpia Garden
Source: Company website Source: Company website
Porta Naviglio Grande: The project is planned for Piazza Ohm in the Navigli area, and involves construction of 72 housing units, scheduled for completion by 2023. Three buildings are planned for the complex: two towers, joined at the base, and a linear block, all overlooking a central green space. As with most AbitareIn projects, the new buildings will stand on a site previously occupied by an industrial building, which was demolished in 2013. We estimate that revenues from the project could be circa Eu30mn.
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Porta Naviglio Grande Porta Naviglio Grande
Source: Company Website Source: Company Website
Below a summary of the ongoing projects and the expected turnover.
Ongoing projects summary Residential Expected turnover Completion Vehicle District Status units (Eu mn) date Milano City Village Porta Romana 210 78 2022 In construction Trilogy Towers Portello 130 55 2022 In construction Palazzo Naviglio Navigli 76 31 2023 In construction Savona 105 Navigli 140 70 2024 Commercialization Olimpia Garden Porta Romana 138 47 2021 Completed Porta Naviglio Grande Navigli 72 30 2023 Commercialization Source: Company data & Intermonte SIM Estimates
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Pipeline In addition to the projects listed above, where commercialisation is at least under way, the company has already selected the sites for further development initiatives, as summarised in the following table.
AbitareIn: Pipeline Floor area Land price Vehicle Project District Status (sqM) (Eu mn) Milano Progetti Cadolini Ex Plasmon Porta Romana 32,000 15.15 Paid AID 4 Zona Naviglio Grande Navigli 8,800 3.925 Paid MyCity Porta Romana District Porta Romana 4,150 4.175 Paid Milano Sviluppi Zona Viale Umbria Porta Romana 5,500 1.5 Paid Abitare in Development 6 Piazzale Accursio Portello 6,900 11 Preliminary Mivivi Zona Nolo NoLo 5,200 2.7 Preliminary Milano Living Lambrate 1 Lambrate 6,000 5.3 Preliminary Smartcity Lambrate 2 Lambrate 4,700 2.25 Preliminary AID 4 Vigentino Porta Romana 31,500 16.1 Preliminary Alibranda Zona Certosa Portello 800 0.8 Preliminary Volaplana Zona Corvetto Porta Romana 12,100 3 Preliminary
Source: Company data & Intermonte SIM Estimates
We highlight that various projects in the pipeline are planned for areas of high growth potential and renewal in the coming years. The regeneration of the former rail yards at Porta Romana and Lambrate is covered by the framework programme agreement for redevelopment of these disused railway facilities in Milan signed in 2017 by Milan Council, the Lombardy Region, State Rail Group companies, and Savills Im SGR. By means of international design competitions, the masterplans have been drawn up for the development of Farini, San Cristoforo, Greco (through the first edition of Reinventing Cities), Lambrate and Porta Romana, the site that in 2026 will host the Olympic Village as well as a major park and new services for the area. We will focus on the Porta Romana and Lambrate projects, where various developments in the pipeline are expected to be realized.
Porta Romana Initiatives: Cadolini Ex Plasmon, Porta Romana District, Zona Viale Umbria, Vigentino and Zona Corvetto The Masterplan was presented at the start of 2021 (indicative and non-binding) for redevelopment of the Porta Romana rail hub, which covers c.190k m2 as well as 26k m2 still in the hands of the State Rail Group. [email protected] The plan is for a large park of c. 100k m2 surrounded by residential properties (including social housing and student accommodation), offices and services, with transport connections to the whole metropolitan area via rail and underground stations. The heart of the project will be the park: a 100k m2 grassed area without barriers, whose purpose is to connect the northern and southern sides of the area bordering the rail line. To this is added an elevated garden, standing higher than the rail line, which will cross the entire site from east to west. Around the park residences, offices, social and student housing, and services will be built, with direct connections to the rail and underground stations. The residential areas will be bordered by trees, the ground floors will have neighbourhood services and courtyards with semi-public areas. In the eastern zone there will be a multi-level public square (Distretto Lodi) that will serve as a bridge over the rail lines to link Piazza Lodi (already served by the third underground line and set to be a station on the planned circular line) and the planned residential buildings. The athletes’ village for the 2026 Winter Olympics will be built on the site of the rail yard; once the Games are over the village will be transformed into student housing with c.1,000 beds, as well as standard and subsidised residences. In order to meet the deadlines set, Outcomist will have to present the final design by the end of May, and the project for the structures related to the Olympics by October (delivery scheduled for July 2025). The development of the masterplan will also take into account indications from a jury and promoters, as well as citizens’ observations, which will gathered in the public consultation phase.
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Lambrate Initiatives: Lambrate 1 and Lambrate 2 At the beginning of June a project was awarded for the regeneration of the area around the Lambrate rail yard. Named Lambrate Streaming, the project envisages the creation of a large public park of c.41,500m2, which will cover around 65% of the site in question. The masterplan designed by Caputo Partnership International covers an area of c.65k m2 to the north and south, including the historical Lambrate and Ortica districts. Around 19k m2 of accessibly-priced housing will be built, mainly aimed at younger generations and students, with 307 social housing residences, including subsidies for purchase and rent-to-buy schemes, fixed, subsidised low rent co-housing, student residences and sheltered accommodation. In addition there will be services for the area: these may include a cultural and recreational hub for shows and exhibitions, childcare services, co-working areas, a drop-in centre for young and vulnerable people, local shops and amenities. An in-depth citizen and stakeholder listening and engagement process is guaranteed before completion of the detailed design. The new buildings, which will be developed along the central axis of the rail yard, will be consistent with the height and size of neighbouring developments, with photovoltaic panels to be installed on the rooves in order to generate clean energy for the whole district. The entire development aims to be carbon-neutral within thirty years, through the implementation of a decarbonisation plan. Furthermore, Lambrate Streaming will be developed in synergy with other strategic regeneration projects envisaged for the area. Important public interest developments will be created at nearby Rubattino, including the new Teatro alla Scala theatre laboratories and the new depot for municipal transport provider ATM’s electric vehicles, as well as the redevelopment of the old ‘crystal palace’ industrial site. The “Ex De Nora” urban development plan, which is at an advanced stage of implementation, will also involve the installation of social and subsidised housing and a 12k m2 public park to the area between via Crespi, via dei Canzi and via San Faustino. Finally, on the other side of the railway lines, there is the plan for the regeneration and revaluation of the Città Studi district. The transfer of some departments of the Statale public University to the Mind campus will not reduce the institution’s presence in the area, as it intends to install libraries, research laboratories, innovation hubs and university residences, as envisaged in the framework agreement signed by the Milan City Council, Region of Lombardy and Milan University.
Homizy Homizy’s business, defined as “build to share” is the residential interpretation of the sharing economy: sharing goods, spaces and services to create new opportunities for socialisation and unity, through significant use of technology. The Homizy project will be executed by a AbitareIn group company of the same name
(Homizy S.p.A., already registered as an innovative start-up) and is mainly addressed to young professionals [email protected] seeking modern, high-quality living space. AbitareIn’s entry into the rental market will allow it to put the expertise developed over the years to work: the new buildings will mainly be built through the demolition and reconstruction of existing buildings – in the spirit of urban regeneration – and will feature large apartments with multiple bedrooms, some with private bathrooms and some with shared bathrooms, and shared living zones and kitchens. The project also involves a lower percentage of small studio apartments and numerous communal areas equipped for various activities: from co-working to bike labs, fitness and entertainment. The Milan residential market: The rental sector is also caught up in the buzz surrounding the Milan real estate market. Indeed, there has been constant growth in demand for rental accommodation in recent years, resulting in rising prices in a situation where the supply is increasingly directed towards short-term solutions at the expense of medium to long-term rental formats. This consolidated trend in the Milan residential real estate market is triggering increasingly insistent talk of a genuine housing crisis. Growth in the real estate market, both in the sales and rental segment, goes hand in hand, and is also explained by the city’s demographics. In particular, given the vast supply of both learning and employment opportunities, the city is witnessing ever-increasing numbers of young residents aged between 18 and 35, a highly-qualified influx that is ambitious and has strong economic prospects. In conjunction with this trend, and in common with other leading cities in Europe and the rest of the world, Milan is undergoing the creation of a new type of housing demand, more in keeping with the modern lifestyle of young people who transfer to the big city for work or study. Specifically, the young professionals category is experiencing the demands of a new world of work, more fluid and constantly evolving, which requires increased adaptability and is therefore wedded to more dynamic housing solutions, which are integrated with the main services and promote unity, socialisation and interpersonal relations.
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AbitareIn and Homizy: development synergies. As is the case for AbitareIn, Homizy’s activity is characterised by innovation and technology, both in the design and execution phase and also in the use of services by residents: in that sense, various technological solutions are already being considered, such as apps, platforms, and IT systems for access to the buildings and rooms, in order to simplify building management. The new business is entirely complementary to AbitareIn’s existing operations and will allow it to fully exploit the expertise and know-how developed over the years, with the aim of grasping new opportunities arising on the market. For this reason, AbitareIn will take charge of selecting the districts of the city that are most suitable for the construction of co-living residences, with a constant view to maximising the value of transactions, and the management and coordination of the necessary preliminary activity (such as environmental procedures, authorisation processes, etc.). For its part, Homizy will carry out feasibility studies on the initiatives, draw up the relative business plans, design the building project and oversee administrative operations. Each individual project will be managed by a single operational vehicle, which will be 100% owned by Homizy (replicating the AbitareIn group structure). This structure may also be supplemented by the creation of a vehicle company dedicated to rental management. The two companies have different target clients, although these will certainly converge over time, when Homizy’s young professionals become citizens seeking to buy their first home. Investment: Management believes that the construction of at least 3,000 rooms (which according to current parameters corresponds to an investment of c.Eu175mn) represents the critical mass required to achieve a position of leadership that will enable the company to establish a long-term competitive advantage. Financing will come in part from real estate mortgages with financial institutions and partly through an equity call by Homizy, in whatever way seems most favourable on each occasion. Homizy (or its subsidiaries) will independently raise the economic resources needed for the development of the new business, without drawing on the funds AbitareIn has already allocated to the development of its own core business. The company’s business plan (and our estimates) does not factor in the launch of this new line of business, which should therefore be viewed as a supplementary opportunity.
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Company Strategy
The main strategic actions that the company intends to implement in order to achieve the 2021-23 business plan objectives are outlined below: Increased temporal overlap in residential development projects: exploiting technology, the computerisation of processes and the development of new sales methods, such as the e-commerce platform, the company will be able to significantly reduce the time and cost that the launch and management of commercial campaigns entails, allowing it run a greater number of projects in parallel; Investments in products and optimisation: increase the standardisation of products and production processes in order to reduce execution costs for individual projects; increase the average size of projects, to allow further optimisation and maximisation of economies of scale; Launch of the first Homizy project: through its subsidiary Homizy, AbitareIn intends to deploy its expertise in real estate development to enter the co-living market.
The company’s 2021-23 business plan has three primary strategic objectives: 1) Completion of projects already being commercialised as at the end of the financial year on 30th September 2020. The group plans to complete the projects that have been sold the plan period; the agreements and contracts in place largely define the economic and financial results of each project: a. Milano City Village; b. Trilogy Towers; c. Palazzo Naviglio; d. Savona 105; e. Porta Naviglio Grande; f. Olimpia Garden.
2) Development of further projects that were yet to reach commercialisation as at 30th September 2020. The group intends to focus on urban regeneration, demolishing disused or abandoned buildings and improving the fabric of the city through the development of new residential interventions, mainly new property development initiatives defined as: a. Milano Progetti (i.e. Cadolini Ex-Plasmon property development initiative), b. Milano Progetti 2 (i.e. Zona Viale Umbria property development initiative), c. MyCity (i.e. Porta Romana District property development initiative), d. Milano Living (i.e. Lambrate 1 property development initiative),
e. MiViVi (i.e. Zona Nolo property development initiative), [email protected] f. AID 4 (i.e. Zona Naviglio Grande property development initiative) g. Abitare In Development 6 (i.e. Piazzale Accursio property development initiative);
3) Development of the “construction and rental” business unit. The group intends to develop the Homizy project, offering functional and on-trend housing solutions through a co-living formula. By exploiting economies of scale and its own market expertise, the company intends to develop high- quality new-build products with original design features. It is worth noting that over the course of the business plan the group only factors in the operating costs and investments associated with the business, and not any revenue generation, which will come at a later date.
The operating lines that the group will follow dovetail with the three strategic objectives: Focus on the Milan target market, operating in semi-central zones and the so-called “affordable” segment, i.e. prices of Eu3,500-5,000/m2, completing urban redevelopment projects that involve the demolition of existing buildings and subsequent reconstruction. Modelling the entire industrial process into phases, where the transfer from one phase to another is governed by internal policies aimed at reducing operating risk, for example: i) commercialisation when the authorisation phase is already underway; and ii) starting construction following the commercialisation phase. A company structure that, by allocating a separate operational vehicle holding the property for each project, offers greater transparency on results and faster completion of property development initiatives. According to this format, the Issuer retains the know-how and the personnel with the relevant
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expertise to execute the property development initiative. Through service contracts, the Issuer acts as a consultant to the operational vehicle and provides the services required to carry out the initiative. Meticulous selection of areas and zones ripe for development projects, with detailed analysis of all aspects in order to provide an accurate assessment of commercial, authorisation, environmental and construction risks. Definition of the architectural project and product specifics according to the particular target market, with the aim of developing a high quality and sustainable product, conceived to meet the actual needs of the modern family. Creation and execution of marketing and sales campaigns based on an innovative and effective model, borrowed from advanced and highly competitive sectors (such as the air transport, automobile and high- tech industries), which involves the execution of marketing campaigns -primarily through social media channels – that aim to condense sales into a short time period to enable better planning of construction works. Commercialisation activity is strongly supported by the use of cutting edge technological solutions such as the new e-commerce platform for the sale of residential units. Extremely high levels of product customisation based on client demands (made-to-measure housing) allowing the clientele to choose all the internal décor and finishes, such as the flooring, wall tiles, and domestic systems and appliances, and also to model the internal space according to their own requirements, within the confines of project design, planning and/ or regulatory constraints. Computerisation of all production processes thanks to the use of the Building Information Modelling (BIM) platform, software that includes all the technical information relating to the building and its component parts: detailed geometric plans, equipment, the properties of materials, components, systems and technical elements, the construction phase, maintenance works and end of cycle waste disposal. Advanced client management and the development of a customer relationship management (CRM) platform that takes into account the distinct characteristics of the AbitareIn operating model and allows computerised management of all marketing and sales activity, from registration of the preliminary contracts to the handover of the residential unit.
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Estimates
Our estimates are based on the total for currently commercialised projects, which we described in detail above. Total Revenues is the sum of 1) revenues from sales of residential units; 2) revenues from sales of garages; 3) inventory changes (costs of and margins on orders linked to the progress of works); 4 other revenues (a marginal item). Regarding the main cost items, these are expenses for the purchasing of land, for construction (outsourced) and for personnel. As a result of limited D&A and assuming a steady tax rate of 30% for the next few years, we estimate the net profit CAGR for 2020-2023 at 54%. Our 2021 estimates are broadly aligned to the company’s targets: total revenues of Eu125mn, EBT of Eu24.6mn.
AbitareIn - P&L (Eu mn) 2017A 2018A 2019A 2020A 2021E 2022E 2023E Total revenues 9.3 49.0 44.6 73.1 125.0 175.6 195.2 YoY growth 429.4% -9.1% 64.0% 71.1% 40.4% 11.2%
EBITDA reported 2.4 4.3 11.4 8.8 26.9 45.9 51.1 EBITDA margin 25.7% 8.7% 25.5% 12.1% 21.5% 26.1% 26.2% YoY growth 79.1% 166.5% -22.2% 203.5% 71.0% 11.3%
D&A (0.0) (0.1) (0.5) (0.7) (0.8) (0.9) (0.9) on net revenues 0.2% 0.3% 1.2% 1.0% 0.7% 0.5% 0.5%
EBIT reported 2.3 4.1 10.8 8.1 26.0 45.0 50.2 EBIT margin 25.2% 8.3% 24.2% 11.1% 20.8% 25.6% 25.7%
Financial Charges (0.2) (0.4) (1.4) (2.1) (1.7) (1.8) (2.1) Financial Income 0.0 0.0 0.0 5.2 0.0 0.0 0.0
EBT 2.2 3.7 9.5 11.2 24.4 43.3 48.2
Taxes (1.0) (1.1) (3.1) (2.0) (7.3) (13.0) (14.4) tax rate -47.5% -30.1% -32.6% -18.1% -30.0% -30.0% -30.0% Minorities 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Net income 1.1 2.6 6.4 9.2 17.1 30.3 33.7 YoY growth 0.0% 125.8% 149.3% 44.3% 85.7% 77.5% 11.3% Source: Company data & Intermonte SIM Estimates [email protected] AbitareIn – Balance Sheet (Eu mn) 2018A 2019A 2020A 2021E 2022E 2023E Tangible Assets 5.4 6.4 6.5 6.5 6.5 6.5 Intangible Assets 0.6 1.0 1.3 1.6 2.0 2.2 Financial Assets 0.0 1.0 2.3 2.3 2.3 2.3 Deferred revenues 0.7 0.9 0.9 0.9 0.9 0.9 Fixed Assets 6.7 9.3 10.9 11.3 11.6 11.9 Inventories 66.7 109.9 139.1 164.3 259.4 271.8 Trade Receivables 0.2 0.1 0.6 1.0 1.5 1.6 Trade Payables -4.3 -6.8 -12.5 -13.5 -16.6 -18.4 Downpayments -15.8 -37.1 -57.4 -78.8 -120.4 -101.5 Others 0.0 8.4 8.6 8.6 8.6 8.6 Total Working Capital 46.7 74.5 78.4 81.7 132.5 162.2
Provisions 0.0 0.0 0.0 0.0 0.0 0.0 Employees benefits -0.1 -0.1 -0.2 -0.2 -0.2 -0.2 Others -3.8 -4.2 -4.5 -4.5 -4.5 -4.5 Net capital employed 49.6 79.4 84.5 88.2 139.3 169.3
Total equity 40.8 47.5 58.3 75.4 105.7 139.4 Net Debt -8.8 -32.0 -26.1 -12.8 -33.6 -29.8 Source: Company data & Intermonte SIM Estimates
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AbitareIn – Cash Flow (Eu mn) 2018A 2019A 2020A 2021E 2022E 2023E Net Profit 2.6 6.4 9.2 17.1 30.3 33.7 Amortization & Depreciation 0.2 0.6 0.8 0.8 0.9 0.9 Change in Working Capital (34.8) (27.8) (3.9) (3.3) (50.8) (29.7) Change in funds 3.0 0.5 0.5 0.0 0.0 0.0 Other 0.0 0.0 0.0 0.0 0.0 0.0 Operating CF (29.0) (20.4) 6.5 14.6 (19.6) 5.0 Capex (Tang & Intang) (5.5) (2.6) (1.1) (1.2) (1.2) (1.2) Acquisitions 0.0 0.0 0.0 0.0 0.0 0.0 Disposals 0.0 0.0 0.0 0.0 0.0 0.0 Dividends 0.0 0.0 0.0 0.0 0.0 0.0 Share Buy-back 0.0 0.0 0.0 0.0 0.0 0.0 Rights Issue/ ipo 25.7 0.0 4.6 0.0 0.0 0.0 Other 0.2 (0.3) (4.3) 0.0 0.0 0.0 Cash Flow (8.7) (23.2) 5.8 13.4 (20.8) 3.8 NFP at the beg. of the year (0.1) (8.8) (32.0) (26.1) (12.8) (33.6) Cash Flow: Cash/(Debt) (8.7) (23.2) 5.8 13.4 (20.8) 3.8 NFP at year end (8.8) (32.0) (26.1) (12.8) (33.6) (29.8) Source: Company data & Intermonte SIM Estimates
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Valuation
We believe that the fairest method to evaluate AbitareIn is to estimate the dividends that the individual projects currently being marketed will distribute to the parent company and to estimate those deriving from the pipeline already in the company’s hands. To this, we believe that the potential creation of value deriving from the launch of the Homizy project, which is not even minimally factored into the current stock market price, should at least partially be assessed. All in all, our valuation model yields a target price of Eu74.5 per share (Eu7.45 per share after the stock split).
AbitareIn Valuation Summary Ongoing Projects and pipeline 176.1 Eu mn Homizy 17.2 Eu mn Total 193.3 Eu mn NOSH 2.6 Target Price 74.5 Eu
Source: Intermonte SIM
For projects already underway, we have assessed each project individually, starting from the turnover assumptions outlined in the sections of this report dedicated to each project and an average EBT margin of about 25%. We cautiously estimate that the company will close the operational vehicle relating to each project the year after the estimated completion of works, distributing the cash to the parent company through dividends. In order to put a value on the project pipeline, we estimate that the company will develop around 175,000m2 (current pipeline with projects already in the commercialisation stage removed) over 5 years, with commercialization of the first projects to start in 2022. We envisage the following time frame, in line with the typical timing of projects already carried out: Year 1: Commercialization Year 2 to 3: Construction Year 4: Handover and dividend distribution to the parent company
We underline that our estimate contains important elements of caution, in fact the development of 35k m2 on average per year would translate into turnover of about Eu150mn (assuming an average selling price of Eu4,250 per sqm, mid-range of the Eu5,000/Eu3,500 targeted selling price), lower than our estimate for 2023. [email protected] Finally, as regards the terminal value of our valuation model, we have assumed that the company continues to develop approximately 35k m2 per year, sold at Eu4,250 per sqm and cautiously estimating an increase in construction and land purchase costs that could lead to an EBT margin of approximately 20%, lower than the current 25%. We have discounted back the cash flows at a rate of 9.0%. Given the typical risk of this type of business, which can translate into delays in the delivery of projects and possible penalties, we have factored additional caution into our valuation in the shape of a discount linked to execution risk, arbitrarily set at 20% but which could be decreased in the future along with increases in the number of concurrent projects and the track record of delivering projects delivered without major issues. All things considered, our valuation model yields a value of Eu176.1mn (Eu67.9 per share).
(see table on the next page)
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AbitareIn: DDM 2021 2022 2023 2024 2025 2026 2027 2028 2029 TV Maggiolina 10.0 Milano City Village 13.8 Trilogy Towers 9.8 Palazzo Naviglio 5.4 Savona 105 12.5 Olimpia Garden 7.6 Porta Naviglio Grande 5.3 Pipeline 27.9 24.4 24.4 24.4 20.9 20.0 Expected Dividend 10.0 7.6 13.8 33.0 27.9 24.4 24.4 24.4 20.9 20.0 TV 222.5 Discount factor 0.92 0.83 0.77 0.71 0.65 0.60 0.55 0.50 0.46 0.46 Discounted Dividends 9.2 6.3 10.7 23.4 18.2 14.6 13.4 12.3 9.7 102.5 Total 220.2 Execution risk 20% Fair Value 176.1 NOSH 2.6 Fair value p.s. 67.9
Source: Intermonte SIM
Finally, valuing the Homizy project is particularly challenging at the moment, given that details are still rather limited, but we believe a good proxy may be the valuation assigned to the project at the first capital raising completed in May 2020, which saw the entry of 20 external investors into the vehicle company. The value assigned to Homizy during this capital raise was Eu38.9mn, of which Eu34.4mn pertaining to Abitare In. Given that the timing is still uncertain at the moment (certainly beyond the horizon of the company's three- year plan) and in view of the risks involved in entering a new sector, despite clear synergies with the existing business, we only include half of the value recognised at the capital increase in our target. This nevertheless delivers additional value of Eu17.2mn (Eu6.6 per share).
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Appendix: ESG Key Questions
Are Environmental, Social In addition to fulfilling its commercial and financial goals, Abitare In is also committed to the betterment of and Governance society and generating value for different stakeholders: shareholders, customers and employees. Although considerations part of the the company is not obliged to draw up a non-financial statement pursuant to Legislative Decree 254/2016, company’s business it will nevertheless publish its first sustainability report on a voluntary basis starting from 2021. strategy?
______How is the company The company pays great attention to the impact of its projects on the environment, only building properties reducing its environmental with very high energy efficiency (2,335 apartments in energy class A or above) and with important green impact? areas (1,980 trees planted). It also carries out urban regeneration projects that contribute to increasing the quality standard of the homes offered. Its high sustainability standards allow annual energy savings of
c.22,155MW/h and an annual reduction of 7,754 tons in CO2 emissions in use. Around 3,792MW/h per year of energy come from renewable energy sources.
______How does the company Abitare In works to ensure that all the various stakeholders comply with the principles embedded in the support the people it company’s Code of Ethics. In particular, the company considers the rights and dignity of its workers as an employs? essential factor in conducting its business, encourages diversity (24 employees out of 39 are women) and does not allow any form of harassment or discrimination in the workplace. As written into its Code of Ethics, in carrying out its business the company always ensures the health and safety of its employees and respects
the environment.
______Does the company have an The company has adopted an Organisation, Management and Control model in compliance with legislative anticorruption policy? decree 231/2001. Abitare In’s fight against corruption is inspired, by way of example, by the OECD’s Anti- Bribery Convention, Legislative Decree 231/2001 in Italy, the US Foreign Corrupt Practises Act (FCPA) and the UK Bribery Act, among others. ______How does the company Abitare In only enters into and maintains commercial relationships with suppliers that apply the strictest manage relations with standards of ethics and fairness. In particular, the company undertakes not to enter into any kind of business suppliers? relationship with a party that does not accept the group’s Code of Ethics. ______Does the company have a In the year from September 30, 2019 to September 30, 2020, 530 hours of training were provided, only training policy for internally at the company with the exclusion of courses at third-party entities. employees? [email protected] ______The Board of Directors is made up of six members. The Chairman and CEO is Luigi Francesco Gozzini, and the CEO is Marco Claudio Grillo. There are two female directors, while there are three independent directors. What are the board's key characteristics? ______On 28th April 2021 the company board resolved, inter alia, to call an ordinary shareholder meeting in order to seek approval for the “2021-2023 Stock Grant Plan”. The maximum number of shares that may be issued Is there an incentive strategy for the plan is 102,000, equivalent to 3.9% of the current company share capital. The shares will be granted in place that is linked to meeting ESG goals? in 3 annual tranches on the basis of 3 components. Under the terms of Component A, which covers 20% of the overall rights for assignment, the entitlement to stock grants is conditional on (i) implementation of ESG reporting for the 2021 financial year, and (ii) improvements in the ESG performance in 2022 and 2023, with metrics to be chosen by the board following preparation of the first Sustainability Report.
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Appendix: Sector Peers
FactSet Descriptions: Redrow Plc engages in the development of residential and mixed-use properties, which focuses on house building. It also engages in residential development. The company was founded by Stephen Peter Morgan in 1974 and is headquartered in Ewloe, the United Kingdom. Taylor Wimpey Plc operates as a residential developer. It engages in land acquisition, home and community design, urban regeneration and the development of supporting infrastructure. It operates through the United Kingdom and Housing Spain segments. The United Kingdom Housing segment builds houses in the UK, from one bedroom apartments to five bedroom houses. The Housing Spain segment builds homes in popular locations that appeal to both foreign and Spanish buyers. The company was founded in 1937 and is headquartered in High Wycombe, the United Kingdom. The Berkeley Group Holdings Plc engages in the development of residential and mixed-use properties. It operates through the following brands: Berkeley, St. James, St. George, St. Edward, St. Joseph, and St. William. The company was founded by Anthony William Pidgley and Jim Farrer in 1976 and is headquartered in Cobham, the United Kingdom. Persimmon Plc operates as a holding company of the Persimmon Group of companies, which engages in building, designing, and construction of new homes. Its brands include Charles Church, Westbury Partnershisps, Space4, Brickworks, and Tileworks. The company was founded by Duncan Henry Davidson in 1972 and is headquartered in Fulford, the United Kingdom. Barratt Developments Plc engages in the business of developing residential and non-residential properties mainly in the United Kingdom. It operates through the Housebuilding and Commercial Developments segments. The company was founded by Lawrence Arthur Barratt in 1958 and is headquartered in London, the United Kingdom. Nexity SA engages in the construction, development, and marketing of real estate properties. It operates through the following business divisions: Residential Real Estate, Commercial Real Estate, Services and Other Activities. The Residential Real Estate division engages in residential real estate development and development of subdivisions. The Commercial Real Estate division includes development of offices, high- rise buildings, retail property and hotels; and development of logistics and other commercial facilities. The Services division provides real estate services to individuals and companies and also engages in the management, operation and development of franchise networks. The Other Activities division includes villes & projets and pre-development urban regeneration projects, investment activities, innovative start-up ventures in the incubation phase and the Group's main digital projects and the holding company. The company was founded in 2000 and is headquartered in Paris, France. Vonovia SE is a holding company, which engages in the management of residential units. It operates [email protected] through the following segments: Rental, Value-Add, Recurring Sales, Development, and Other. The Rental segment combines all of the businesses that are aimed at the value-enhancing management of the company's own residential units. The Value-Add segment bundles all of the housing-related services including the maintenance and modernization work on its properties. The Recurring Sales segment includes regular and sustainable disposals of individual condominiums and single-family houses from the company's portfolio. The Development segment consists of project development of new residential buildings. The Other segment comprises disposal of entire buildings or land that are likely to have below- average development potential. The company was founded on June 17, 1998 and is headquartered in Bochum, Germany. ADLER Group SA engages in the ownership and management of real estate properties. It operates through the Residential Property Management and Privatization segments. The Residential Property Management segment comprises rent and management of the residential properties, which includes the modernization and maintenance of the properties, the management of tenancy agreements, and marketing of residential units. The Privatization segment includes aspects of the preparation and execution of the sale of units, as well as modernization, maintenance and management, and generates rental income for non-vacant units. The company was founded by Rabin Savion in 2006 and is headquartered in Senningerberg, Luxembourg. Gecina SA is a real estate investment trust, which owns, manages, and develops property holdings. It focuses on the acquisition of land, construction of buildings, financing of the acquisition and construction operations, and sale of real estate rights or properties. It operates through the following segments: Commercial, Residential, Student Residences, and Other Sectors. The Other Sectors segment includes financial leasing, real estate trading and the operation of hotel companies. The company was founded on January 14, 1959 and is headquartered in Paris, France.
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Disclosure time 15/06/2021 07:40:29 Aroundtown SA engages in investing on value-add and income generating properties primarily in the German and Dutch real estate markets. Its portfolio includes office, retail, logistics/wholesale, and hotel. The company was founded on May 7, 2004 and is headquartered in Luxembourg. TAG Immobilien AG engages in the acquisition, development, and management of residential real estate. It operates through the Rental and Services segments. The Rental segment manages residential portfolio in the following regions: Berlin, Chemnitz, Dresden, Erfurt, Gera, Hamburg, Leipzig, Rhine-Ruhr, Rostock, and Salzgitter. The Services segment includes business activities attributable to the internal service companies. The company was founded in 1882 and is headquartered in Hamburg, Germany.
Sector Peers Mkt cap Company name Country EV/EBITDA EV/EBIT PE (EU mn) 2020E 2021E 2022E 2020E 2021E 2022E 2020E 2021E 2022E Development for sale Redrow GB 2,709 14.6 x 7.9 x 6.5 x 15.5 x 8.1 x 7.0 x 20.3 x 10.3 x 9.0 x Taylor Wimpey GB 7,081 17.5 x 7.2 x 6.2 x 18.3 x 7.3 x 6.5 x 25.7 x 10.2 x 8.9 x Berkeley Group Holding GB 6,504 9.2 x 9.2 x 9.3 x 9.2 x 9.1 x 8.0 x 14.1 x 13.6 x 13.0 x Persimmon GB 11,429 10.0 x 9.1 x 8.6 x 10.3 x 9.1 x 8.9 x 14.1 x 12.6 x 12.0 x Barratt Developments GB 8,684 13.8 x 7.5 x 6.6 x 13.9 x 7.6 x 6.7 x 18.9 x 10.8 x 9.8 x Nexity FR 2,397 6.1 x 6.0 x 5.3 x 11.4 x 9.7 x 7.7 x 21.7 x 14.3 x 11.2 x Rental business Vonovia DE 30,845 28.7 x 30.5 x 28.8 x 28.0 x 28.5 x 26.7 x 25.3 x 21.0 x 21.5 x ADLER Group LU 3,123 50.3 x 35.0 x 32.6 x 15.3 x 11.7 x 12.1 x Gecina FR 10,262 33.6 x 35.4 x 34.2 x 33.6 x 38.8 x 36.5 x 23.6 x 25.0 x 24.5 x Aroundtown LU 10,867 25.2 x 26.2 x 24.0 x 26.2 x 28.8 x 25.6 x 14.3 x 22.7 x 12.1 x TAG Immobilien DE 4,061 28.2 x 29.1 x 27.5 x 26.2 x 30.2 x 28.7 x 11.3 x 11.3 x 12.2 x Median 17.5 x 9.2 x 9.3 x 16.9 x 9.4 x 8.5 x 18.9 x 12.6 x 12.1 x
Source: FactSet
DETAILS ON STOCKS RECOMMENDATION Stock NAME ABITARE IN Current Recomm: OUTPERFORM Previous Recomm: -- Current Target (Eu): 74.50 Previous Target (Eu): -- Current Price (Eu): 58.00 Previous Price (Eu): -- Date of report: 15/06/2021 Date of last report: --
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