CAPITAL MARKETS DAY MILAN
18 OCTOBER 2018 PROGRAM
8:30 am PRESENTATIONS strategy Focus on Italy with Q&A Focus on Hotels Q&A
12:15 pm LUNCH
1:30 pm PROPERTY TOUR
5:00 pm END OF THE DAY
CMD 2018 2 CONTENTS
I. 04 II. FOCUS ON ITALY
II-A. Milan office market (Cushman & Wakefield) 27
II- strategy in Italy 54 III. FOCUS ON HOTELS
III-A. European Hotel market (MKG) 83
III- strategy in Hotel Real Estate 122 IV. PROPERTY TOUR 155 V. APPENDIX 167
CMD 2018 3 I. STRATEGY A UNIQUE AND SUCCESSFUL BUSINESS MODEL BASED ON 3 STRATEGIC PILLARS
Focus on European Property capital cities developer for its Client centric own account
Countless 23 bn 5 bn initiatives to portfolio1 pipeline2 anticipate client needs
CMD 2018 1 €15 bn Group Share; 2 €3.7 bn Group Share 5 A SIMPLIFIED COMPANY, FOCUSED ON ITS KEY SEGMENTS
Extensive simplification work Leading to a simplified company, over the past 12 months stronger in its segments
End-2017: Delisting of FDL (residential France) Offices
Early 2018 Merger of the two Hotels 10.6 bn investment vehicles 8.8 bn Group Share into Covivio Hotels
Hotels GAV1 German End-2018 Europe Residential Merger Covivio Beni Stabili 23 bn 15 bn Group share 5.9 bn 5.4 bn 2.3 bn Group share 3.5 bn Group share
Ownership: 42.3% Ownership: 61.7% (General partner)
CMD 2018 1 As of mid-2018, including secured transactions in H1 2018 and €0.9 bn (€0.7 bn Group share) of non-strategic assets 6 A LEADING PLAYER IN EACH OF OUR SEGMENTS: OFFICES FRANCE: 6.5 billion portfolio ( 5.5 billion Group share)
Quality of the location Quality of the buildings 5.3 bn in the major business districts of Greater Paris 75% Green assets
Major business districts <3% Non-core to be sold by 2020
Covivio assets % of the portfolio in Strong performance Group share
20% +2.4% 9-12% Like-for-like rental growth H1 2018
6-9% 3-6% 96.9% 1-3% Occupancy rate H1 2018 <1% Average 5 years: 96.5% And 0.9 bn in major business districts of the main regional cities (Lyon, Marseille, Bordeaux, etc.)
CMD 2018 Sources: APUR, ORIE 7 A LEADING PLAYER IN EACH OF OUR SEGMENTS: OFFICES ITALY: 4.1 billion portfolio ( 3.3 billion Group share)
Growing performance Quality of the location
A portfolio more An unparalleled Like-for-like rental growth concentrated in Milan 2.3 billion portfolio in Milan1 +1.5%
M3 +1.1% 68% Milan offices (+19 pts vs end-2015) 2 M2 +2.0% in Milan M1
Porta 19% Telecom Italia Nuova M5 Semi-center 0% assets outside Milan1 2016 2017 H1 2018 CBD M4
Center 8% Rome & Turin 59% CBD & Porta Nuova 5% Periphery 97% Others 22% Center & Occupancy rate at mid 2018 Semi-center 19% Periphery Rented portfolio
Developments
CMD 2018 Data proforma of the approved merger with Beni Stabili 8 1 Group share ; 2 Excluding Telecom Italia assets GERMAN RESIDENTIAL: A LEADER IN BERLIN CITY CENTER 5.4 billion ( 3.5 billion Group share)
A top-quality portfolio With 3.0 billion1 prime assets in Berlin
Dresden, Prime Berlin Leipzig & NRW location Hamburg % 73% of the of the portfolio portfolio in value 56% 15% 28% Good location 22% of the Like-for-like portfolio rental growth +5.7% +3.1% +4.2% Average H1 2018 location 5% of the portfolio Reversionary Basic location potential Mid-2018 +35% +20%-25% +20%
Green area
Owned assets Source: Engel & Völkers Residential
1 CMD 2018 €2.0 billion Group share 9 HOTEL REAL ESTATE: A LEADER IN EUROPE 5.9 billion portfolio ( 2.3 billion Group share) A balanced portfolio
In the major European cities With the best operators Within hotels segments (cities with more than 2 million overnight stays annually) in each countries % of upscale and midscale (mainly 4* and 5*) 73% Brussels London Bruges Edinburgh Amsterdam Glasgow Oxford, etc. Berlin 16% Dresden 9% 28% Leipzig Frankfurt Munich Paris etc. Lyon 33% Marseille, 2015 2016 H1 20181 etc.
14% Madrid Barcelona Leading to strong operating performance
breakdown in % of revenue 100% +3.6% Occupancy rate since the Like-for-like revenues beginning in H1 2018 1 CMD 2018 Including the acquisition of the UK Hotel portfolio 10 ASSET ROTATION: A NEW STEP
Yesterday Today
Streamlining of the portfolio by selling non-core Finalize the disposal of non-strategic activities and non-strategic assets with high yield and high risk 0.7 billion Group share (5% of the portfolio) 4.9% average yield
Dilutive impact of disposals is ending
Average yield of the mature assets sold in H1 2018 % of non-strategic assets1 10% 3.6%
5.70% 5.60%
IFRS yield of disposals 5.50% 5% Average yield of the IFRS yield of the portfolio development pipeline 4.92% ~5.9% 5.00% 4.85%
2016 2017 H1 2018
CMD 2018 1 Change between end-2015 and H1 2018 proforma of the merger with Beni Stabili 11 THE SUCCESS OF THE INVESTMENT POLICY REFLECTED IN AN ACCELERATED OPERATING PERFORMANCE H1 2018 Average of the last 4 years +2.4% France Offices +0.9% Accelerated Like-for-like growth in revenue +3.0% +1.5% Italy Offices -0.4% +2.0% +4.6% German Resi. +3.7% +3.6% Hotels +0.9% +0.2% -0.1%
Sustainable high occupancy rate 97.9% 96.3% 96.7% 97.6%
2015 2016 2017 H1 2018
CMD 2018 12 FUTURE GROWTH IS IN OUR HANDS COUNTLESS INITIATIVES TO ANTICIPATE CLIENTS NEEDS 2001-2007 Since 2008 Since 2017
► Real estate as a ► Real Estate as a source of ► Real Estate as a source of productivity needs source of financing corporate image and part of the and ability to attract talent Companies ESG policy ► Location, cost ► Location, cost, energy performance ► Location, well-being, flexibility, cost main criteria
Creation of a property Acceleration of the development pipeline, Sale-and-leaseback development expertise cross countries, cross assets strategy in Offices Launch of new activities (coworking, etc.) and services
3.6 bn 2.3 bn of assets ( 1.8 bn GS) delivered pipeline since 2008 to be committed
CMD 2018 14 FOCUS ON THE 1.8 BILLION PIPELINE TO BE COMMITTED
Committed pipeline
1.8 billion Group share 2.3 billion at 100%
78% Offices Deliveries x 3.6 (Group share)
~ 880 m 4% Hotels
0.5 billion Group share 0.9 billion total share ~ 470 m 2% German residential
~ 250 m ~ 225 m 16% mixed-use ~ 0 m 2019 2020 2021 2022 2023 End-2017 Expected End-2018 / 2019
CMD 2018 Data on total costs of the projects, including land value and financial costs 15 DEVELOPMENT PIPELINE | HIGH-QUALITY PROJECTS IN CAPITAL CITIES
High-quality projects centrally located in Paris, Milan & Berlin
Paris Milan Berlin In major business districts In the CBD & main business districts Highly central locations
M3 Paris Batignolles St-Ouen Bicocca Neuilly M2 Certosa Levallois M1 Maciachini
Paris CBD Porta City Life Nuova M5 Semi-center Lambrate / Paris 5-6-7ème Forlanini Alexanderplatz CBD M4
Lorenteggio Center Linate Airport
Navigli Montrouge-Malakoff Ripamonti
Periphery
Milanofiori Committed projects Business districts Projects to be committed
CMD 2018 16 EXTRACTING GROWTH THROUGH STRONG DEVELOPMENT EXPERTISE
OFFICES NEW REDEVELOPMENTS CONSTRUCTIONS ~ 815 MILLION GS 1.8 billion1 ~ 1 BILLION GS OF PROJECTS OF PROJECTS of committed projects by end-2018 or early 2019
+322,000 m² of additional surfaces
35 million rental income2 61 m of new rental income of which 16 m additional rental2 income vs. today Land banks in Offices and Hotels Mixed-use projects through extensions and rent increase Land banks in Berlin
1 CMD 2018 Data on total costs Group share of the projects, including land value and financial costs 17 2 Rental income excluding Jean Goujon where Covivio plans to move its Paris offices REDEVELOPMENTS (1/2) | EXTRACTING RENTAL GROWTH FROM OFFICES 7 projects representing 900 million total costs ( 815 million Group share)
Today Tomorrow
obsolete buildings Improve the quality prime & smart assets mostly in Paris & Milan Group share: + 16 million1 additional rent Extend the surface +42% vs. today rent Rental 19 Cost ~ 815 m +81% 1 income1 million Yield 5.5% rental income
Increase the rent /m² +39% rent
CMD 2018 1 Rental income and yield excluding Jean Goujon where Covivio plans to move its Paris offices 18 REDEVELOPMENTS (2/2) | ILLUSTRATION OF 3 PROJECTS
Silex2, Lyon (50% share) 31,000 m² Delivery 2020 Former EDF asset to be redeveloped into a prime asset in the heart of Lyon CBD, in front of the Part-Dieu train station. The surface will be doubled.
Paris St-Ouen 30,000 m² Delivery 2021
Former Citroën headquarters acquired in 2012 at 8.1% yield in the business district of Paris 17th Saint Ouen. The surface will be extended by 70%.
Via Dante, Milan 4,800 m² Delivery 2019
Trophy asset located in the heart of the CBD. The office part will be redeveloped and extended by more than 15%. CMD 2018 19 NEW CONSTRUCTIONS (1/3) | EXPLOITING OUR LAND BANKS 14 projects in total representing ~ 710 million of costs (~ 635 million Group share)
Orange - Montpellier Cité du Numérique - Bordeaux Flow Greater Paris Hotels in Europe1 16,500 m² turnkey project A 19,200 m² flagship 23,600 m² in a major business 617 rooms in for Orange Innovative project district of Greater Paris Paris & Lyon
Group share: + 42 million additional rent
Cost ~ 635 m Yield 6.6%
The Sign Milan Symbiosis School Milan Principe Amedeo - Milan 26,500 m² in the southern 9,400 m² in an upcoming A 7,000 m² prime redevelopment limit of Milan Center business district in the CBD
CMD 2018 1 Owned at 42% 20 NEW CONSTRUCTIONS (2/3) | MIXED-USE PROJECTS ~ 615 million of projects in Paris & Berlin (~ 305 million Group share)
N2 (50% share) 15,900 m² in Paris 17th
Eiffel Creating synergies between tower Etoile La Défense our activities to deliver CBD the best projects
New Paris Courthouse Development and office Offices & Flex-offices expertise from our French team Group share: Hotel M14 N2 Ground-floor retail + 16 million additional rent Berlin Alexanderplatz (50% share1) Hotel skills to best position 70,000 m² (60,000 m² net lettable area) to be delivered in 2023 the hotel part of the asset Cost ~ 305 m Yield 5.1% Yield on offices 5.9% Brandenburg Gate Residential expertise and local network from our Berlin team
City hall Park Inn Alexanderplatz Hotel station
Offices Residential Ground-floor retail
CMD 2018 1 A dedicated vehicle to be owned (above 50%) and managed by Covivio will carry the project 21 NEW CONSTRUCTIONS (3/3) | EXPLOITING OUR LAND BANKS IN BERLIN
The low densification of Berlin city center offers opportunities for residential developments in our portfolio
500 million to be delivered by 20221
2,400 units on 163,300 m² Group share on projects to be 80% Berlin committed: 20% Hamburg + 3.7 million 5.3% additional rent average yield on cost Cost ~ 68 m Yield 5.5%
110 million ( 68 million Group share) to be committed at end-2018
1 CMD 2018 €310 million Group share 22 DEVELOPMENT PIPELINE: A KEY DRIVER FOR EARNINGS GROWTH
Additional rents in the year after the delivery + 40 m
Additional rent vs today ~ + 77 million Group share
Representing 11% of annualized revenue at end-June 2018 + 14 m + 11 m + 12 m 1.8 billion Group share of projects
of which 1.2 billion Group share to be invested1 2020 2021 2022 2023 & beyond ~5.9% yield on cost Major impact in 2021 ~30% value creation
1 CMD 2018 At end-June 2018 23 KEY TAKEAWAYS KEY TAKEAWAYS
A specialist in each of our segments with strong local teams offering resiliency in a volatile environment and benefiting from the complementarity and synergies between hotels, office and residential
In the short term
+ 77 Additional rents in the developments projects million to be committed in 2018 & 2019
In the medium term
640,000 m² 3.0 billion Managed pipeline
~+ 60 million Reversionary potential
CMD 2018 25 II. FOCUS ON ITALY II-A. PRESENTATION OF THE MILAN OFFICE MARKET BY CUSHMAN & WAKEFIELD
Joachim Sandberg Head of Italy and Southern Europe Region
Joachim Sandberg founded C&W office in Rome in 1998, when he was promoted to Partner. He became an Equity Partner in 2002, is now an International Partner, and was appointed Managing Director of Cushman & activities in Italy in 2011. He is member of the EMEA Board of C&W and is head of the Southern Europe Region.
CMD 2018 27 MILAN THE CENTER OF WHAT’S NEXT
Joachim Sandberg Head of Italy and Southern Europe Region
OCTOBER 18, 2018
CUSHMAN & WAKEFIELD | 28 Agenda
• Key Facts • Real Estate Market • Trend • Conclusions Key Facts
CUSHMAN & WAKEFIELD | 30 Slowdown is mostly broad-based; Italy still lags behind
Real GDP, % change
Euro Area Despite that, the Italian economic news remains Italy reasonable:
U.K. • GDP annual growth at France 1.5% in 2018 • Return on inflation, Euro Area expected just below 2% by the end of the year Germany • Unemployment rate is Switzerland declining standing at 10,4%; Spain • Employment is above the level seen in 2008 Netherlands
Poland
Ireland
0 1 2 3 4 5 6 7 8 9 2018F 2017
Source: ©IMF, 2018 for GDP; ISTAT for unemployment rate, July 2018 Note: forecast should be considered only as an indication of future trends
CUSHMAN & WAKEFIELD | 31 The city level story is different: Milan is at the center of a growing Europe GDP Growth in the major European Cities, annual % change
4.5
4 • Lombardy: 3.5 22% 3 of Italy’s GDP
2.5 • Milan Metropolitan 2 area: 1.5 10% 1 of Italy’s GDP
0.5
0
Paris
Milan
Berlin
Madrid
London
Brussels
Frankfurt Amsterdam 2017 2018
Source: Oxford Economics, June 2018
CUSHMAN & WAKEFIELD | 32 Lombardy: GDP per capita among the highest in Europe
GDP per Inhabitant, by NUTS 2 regions,2016
• Milan, with €190bn of urban GDP ranks 1st among Europe’s Non- Capital Cities
Source: Eurostat, based on data in PPS in relation to the EU-28 average, EU-28=100 CUSHMAN & WAKEFIELD | 33 Milan, ‘the rising city’
FACTS & FIGURES
GROWING CITY
In the last years some areas of the city have 3,22mn been completely reshaped, such as Porta inhabitants make Milan the Nuova and Citylife districts. largest continuously built-up 2015 Expo fair brought 21m visitors to the city urban area in Italy and one of and was a catalyst for infrastructure projects. the largest urban area in Europe FINANCIAL CENTER A 4th Metro line was completed and areas such as Navigli, the canal district, was renovated. Milan is Italy's main industrial and financial center. Its business district hosts Italy’s Former Stock Exchange and the headquarters of the largest national and international banks and 6.6% companies. Out of the world’s top 10 multinational companies operating in Italy, 7 of them have their main offices in Milan. Strong labor market points at a lower unemployment rate compared to the European city TOURISM average (8.2%) Tourism flow in Milan has sharply increased since 2015 and in 2016 Milan ranked first as a destination in Italy with almost 8 mln of arrivals GLOBAL CITY +2% on 2015 and the trend is increasingly positive. Milan is a leading global city, with strengths in the 53,100 € arts, commerce, design, education, entertainment, Gdp per capita ranks Milan fashion, finance, healthcare, media, services, above the European city research, and tourism. average GDP per capita (50,500 The city is a major world fashion and design €) and well above the national capital, well known for several international events average ( 28,400 €) and fairs, including Milan Fashion Week and the EDUCATION HUB Milan Furniture Fair. 1,000+ The city hosts numerous cultural institutions, academies and Start-ups based in Milan, universities, with 11% of the national total enrolled students. It’s home which make the city a to Bocconi University, one of the top-rated universities for business leading European hub for and finance in Europe. Not only for business, Milan hosts excellences start-ups also in the field of architecture and science and technology (Politecnico), design and Medicine. 4bn Invested in Research & Development, with the 25% of all Italian patents registered in the city Source: Oxford Economics, Eurostat, Istat and various sources
CUSHMAN & WAKEFIELD | 34 Real Estate Market
CUSHMAN & WAKEFIELD | 35 Positive economic framework is boosting occupiers’ demand Milan take-up evolution and future trends
Average*** 330,000 sqm
Average* 290,000 sqm • Take-up sharply increased since 2012: + 50% expected by the year end • Yearly average take-up on the rise: +20%** • Grade A take-up more than doubled since 2012 • Grade A take-up: 70-80% of the total take-up on average
Source: Cushman & Wakefield; * 2010-2017 annual average take-up; ** 2010-2017 annual average take-up compared to 2000-2009 annual average take-up (240,000 sqm);***Average annual take-up based on forecasted take-up over the 2018-2021
Note: forecast should be considered only as an indication of future trends
CUSHMAN & WAKEFIELD | 36 Overall, occupiers’ market fundamentals are robust…
SSG STOCK Malpensa Orio al Serio Airport Airport 12,3 million sq m GRADE A: 18% Cernusco Bicocca Vimodrone 2,2 million sq m
Certosa VACANCY RATE Maciachini 10,3 % Fiera GRADE A VACANCY CityLife CBD Segrate RATE*
Forlanini < 3 % PERIPHERY
TAKE UP H1 2018 CENTRE Linate Airport SEMI- 203,000 sq m CENTRE Lorenteggio Ripamonti +40% On the 10 years average average
PRIME RENT SDM CBD MILANOFIORI 570 €/sq m/yr Source: Cushman & Wakefield Note: * Grade A vacancy rate estimated as Grade A availability as a share of total stock
CUSHMAN & WAKEFIELD | 37 …with different sub-markets dynamic: CBD, Center and Semicenter gaining momentum
Orio al Serio Malpensa Airport Airport Vacancy Rate: 5% Vacancy Rate: 4% Take Up: Take Up*: +5% +25% 2017/16 yr/yr 2017 /2016 yr/yr Rent: €320 sqm yr Rents: €570 sqm yr y Rate
SEMI- CENTRE CBD
CENTRE Linate Airport
Vacancy Rate: 6% Take Up: +22% 2017/2016 , yr/yr Rents: €430 sq m yr
Source: Cushman & Wakefield Note: * Annual change excluding a large leasing deal in 2016 (Generali leasing 42,000 sq m in the CityLife mixed-use development scheme)
CUSHMAN & WAKEFIELD | 38 Trend
CUSHMAN & WAKEFIELD | 39 New constructions are ramping up, but demand is expected to digest the new supply Developments – Completions and Pipeline (speculative and pre-let)
• New construction at 4. 1% on the total office stock in 400.000 Average take-up* Milan, above some of the 330,000 sqm major WE cities 350.000
300.000 Grade A Average take-up* circa 260,000 sqm • Despite increasing 250.000 development activity compared to the previous 200.000
sqm years, robust take-up Average* speculative projects 150.000 125,000 sqm forecast is expected to absorb the new stock 100.000
50.000
- 2010 2011 2012 2013 2014 2015 2016 2017 2018 (f) 2019 (f) 2020 (f) 2021 (f)
Completions/Refurbishment (sqm) Speculative Projects/Refurbishment (sqm) Potential Projects/Refurbishments (sqm)
Source: Cushman & Wakefield; * yearly average of the forecasted take-up over 2018-2021 Note: forecast should be considered only as an indication of future trends
CUSHMAN & WAKEFIELD | 40 Grade A availability to reach the lowest level in 2019, not matching expected demand Availability evolution and future trends
1.400.000
1.200.000 • Current development
1.000.000 activity will not support expected grade A occupier’s demand 800.000 • Sharp decline of Grade A m² Average availability in the next 600.000 Grade A 400,000m² years
400.000 Average Grade A 150,000m² 200.000
0 2010 2011 2012 2013 2014 2015 2016 2017 2018 (f) 2019 (f) 2020 (f) 2021 (f)
Grade A Grade B
Source: Cushman & Wakefield Note: forecast should be considered only as an indication of future trends
CUSHMAN & WAKEFIELD | 41 Lack of supply combined with strong demand supported rental increase and will continue during the next years Prime rents evolution and forecast in the CBD
600
• Strong competition for better quality space drove up rents above the previous peak in the CBD:
500 /sqm/yr € +8% Yr/Yr Q2 2018/Q2 2017
400 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 (f) (f) (f)
CBD
Source: Cushman & Wakefield Note: forecast should be considered only as an indication of future trends
CUSHMAN & WAKEFIELD | 42 Real estate playing a key role for Corporates brand identity
Talent Network Smart working Co-working Well workplace Milan ranks in the lowest tail in the city ranking for flexible office workplace stock in Europe Estimated total flexible workplace stock across Europe
7.00% Flexible workplace stock as percentage of total stock 6.00%
5.00% • The main European cities house around 1.4 mln mq 4.00% of flexible workplace, accounting for an average 3.00% of just 1% of total stock
2.00%
1.00%
0.00%
Milan
Berlin
Rome
Madrid
Prague
London
Warsaw
Brussels
Frankfurt
Budapest
Barcelona
Stockholm
Amsterdam Greater Paris Greater
Source: Cushman & Wakefield Research & Insight, Coworking 2018
CUSHMAN & WAKEFIELD | 44 Serviced offices take-up increase driven by economic changes as well as structural changes
Milan “serviced office” take-up 2015-2018 (f) and share on the total take-up, all sub-markets Major Players
35,000
30,000 30,000
25,000
20,000 m
Sq 15,000
9,800 10,000 6,500
5,000 4,000
1.4% 2.0% 2.8% 8.1% 0 2015 2016 2017 2018 (f) Office as a Service take-up % of total take-up
Source: Cushman & Wakefield
CUSHMAN & WAKEFIELD | 45 Future demand will continue to support rental increase, driving future values Rents under pressure for prime properties
20,000 6.00%
5.00% 16,000 • Prime office yields might experience
4.00% further slight sqm € 12,000 compression in H2 2018, reaching the 3.00% % yield Net lowest level in the cycle
Capital value value Capital 8,000 by the end of the year 2.00%
4,000 1.00%
0 0.00% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 (f)
Capital Value - CBD Prime Yield - CBD
Source: Cushman & Wakefield Note: forecast should be considered only as an indication of future trends
CUSHMAN & WAKEFIELD | 46 Strong Occupier’s sector means strong investment activity
Milan Office Market - Single Assets & Portfolio
€ Mln Office Share of Porta Nuova Milan 10 year average
3,500
3,000 • Milan more than doubled office
2,500 investment since 2012, competing with the
2,000 largest european cities
1,500
1,000
500
0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 H1
Source: Cushman & Wakefield
CUSHMAN & WAKEFIELD | 47 Strong core/core plus Investors’ demand leading to record low yields
• Institutional Investors targeting Fully Let, Grade A assets in CBD/Central locations or Good Secondary locations • National and Foreign pension funds and insurance companies the most active on core/core plus. • Prime net yields below 3.5% in CBD and below 5% in Good Secondary locations. • Shortage of Investment Grade opportunity
CUSHMAN & WAKEFIELD | 48 Lack of Investment Grade is driving investors to create core; Opportunistic Investors still active on the market
• Core investors are targeting value add opportunities in grade A location to create value (built to core). • Opportunistic investors still active. • International players betting on Milan as a permanent location, driving up values for empty and or partially let buildings in CBD/Central areas. • International developers and PE are back to invest in development which comprises mixed-use.
CUSHMAN & WAKEFIELD | 49 Conclusions
CUSHMAN & WAKEFIELD | 50 Future Trends
Extended economic cycle with positive demographic trends will continue to support occupiers’ Strong Occupier demand Market
Development, Investors and developers are filling New areas are challenged to become Built to core asset the gap in terms of supply repositioning and new office submarkets (ex railway mixed-use yards, large regeneration areas)
What We See…
Strong NWOW, smart Corporate’s demand is changing: Rental increase will drive value; investors’ working, flexible flexible office space on the rise but growing interest for secondary demand office space traditional stock will continue to have locations, with strong fundamentals the largest share Rents are set to increase in the major office submarkets Undersupply of the right space should boost rents further up
CUSHMAN & WAKEFIELD | 51 Terms of Use Data Series
In using the data contained in this report, the following should be noted:
• The data series has been prepared based on information which has been collected through our own research as well as material available to us from public and other external sources. In respect of all external information, the sources are believed to be reliable (unless stated) and have been used in good faith. However, Cushman & Wakefield has not verified such information and cannot accept responsibility for their accuracy and completeness, nor for any undisclosed matters that would affect the conclusions we have drawn. Nonetheless, in interpreting the information used, we have had to rely on the validity and accuracy of the data and information sources available to us.
• We have taken every possible care in the collation of this data series. The data is believed to be correct at the time of reporting, but may be subject to change during the life of the project and beyond and as new information becomes available. We reserve the right to change data without prior notice in the light of revised market opinion and evidence.
• In accordance with standard practice, we would confirm that the information is confidential to the parties to whom it is addressed, for their sole use, and for the purposes of this Capital Market’s day only. No responsibility is accepted to any third party in respect of the whole or any part of its contents. Neither the whole, nor any part of this project or data series, nor any reference thereto, may be included in any document, circular or statement without our written approval of the form and context in which it appears. It may not be reproduced by any means (electronic or otherwise) without prior written consent from Cushman & Wakefield.
• Information on assumptions, methodologies or definitions can be obtained from Cushman & Wakefield.
CUSHMAN & WAKEFIELD | 52
II-B. STRATEGY IN ITALY CONTENTS
1. TEAM AND ORGANIZATION 2. STRATEGIC POSITIONING 3. OFFICE MILAN PORTFOLIO a. TROPHY CLUSTER b. CASH FLOW CLUSTER c. REVERSIONARY POTENTIAL CLUSTER
4. DEVELOPMENT PORTFOLIO 5. NON STRATEGIC PORTFOLIO 6. TELECOM ITALIA PORTFOLIO
CMD 2018 55 INTEGRATED ORGANIZATION STRUCTURE
In-house expertise
MANAGEMENT
REAL ESTATE ENGINEERING ASSET MANAGEMENT, LETTING ACQUISITIONS & PROPERTY AND FACILITY AND PROPERTY DEVELOPMENT AND TENANT RELATIONS DISPOSALS MANAGEMENT
Managing the entire Real Estate value chain
Sourcing Project Construction Management
A fully integrated organization offering a full set of property services to our tenants
CMD 2018 56 AN EXPERIENCED MANAGEMENT TEAM IN ITALY
Barbara Pivetta Lorenzo D Gianluca Paonessa Francesco Barbieri Alexei Dal Pastro Head of Acquisitions General Manager CFO Head of Asset Management Head of Disposals 15 years of experience 18 years of experience 12 years of experience 19 years of experience 9 years of experience in Real Estate in Real Estate in Real Estate in Real Estate in Real Estate
. Joined Covivio in 2016 . Joined Covivio in 2007 • Joined Covivio in 2018 . Joined Covivio in 2017 • Joined Covivio in 2016 . Formerly Head of Fund . Corporate Finance, M&A • Worked in M&A and . Asset management • Asset management and Asset Management and capital markets asset management at experience at Prelios and business of Prelios experience at Covivio, DeA Capital RE SGR, SGR, Realty Partner, developement at AEDES and JP Morgan Prelios and Morgan and Zero SGR Prelios and Generali RE . Graduated in Stanley Economics from Trento . Graduated in Business . Graduated in • Graduated in University, with an MBA Administration from • Graduated in Architecture and Economics and Real from the University of Bocconi University. Engineering from the Finance from the Estate from Bocconi Kansas (USA). Politecnico of Milan and Politecnico of Milan and University and MIT, the at the '24 Ore Business Boston. of Illinois at Chicago School' of Milan.
CMD 2018 57 STRENGTHENING OUR CLIENT CENTRICITY
Preparing ourselves for the future of real estate Sharing know-how & leveraging synergies between markets and countries
FULL INTEGRATION TO BUILDING AS AN LAUNCHING WELLIO, BEST SERVE OUR INTEGRATED SYSTEM OUR FLEX-OFFICES SITE, BUILDINGS, MATERIALS, PEDESTRIAN CLIENTS PATH AND GREEN ENERGY SOLUTION BRAND
Smart collaboration for working solutions Deliver of a smart public square Ongoing project in Milan CBD Q4 2019 Enhancing client Building an environment to stimulate Bringing services and new direct relationship productivity and well-being real estate solutions
Adapting our products Be closer to the end-user CMD 2018 58 THE LEADING PLAYER IN THE MILAN OFFICE MARKET
A high-quality office portfolio: 3.3 billion Group share ( 4.1 billion at 100%)
68% 19% Milan offices Telecom Italia assets outside Milan1 97.0% occupancy
8% Rome & Turin 5% Others
And 0.3 billion of non-strategic retail to be sold by end-2019
1 CMD 2018 Excluding Telecom Italia Assets in Milan 59 A SUCCESSFUL BUSINESS MODEL, DELIVERING ON STRATEGY
A successful business model, delivering on strategy
FOCUS ON MILAN DIVERSIFIED TENANT BASE
% of portfolio in Milan % of Telecom Italia assets % of Green assets 68% 41% 67%
2015 H1 2018 H1 2018 20% 22% 49% H1 20181 2015 2015 Target 2022 90% Target 2022 20% Target 2022 80%
High-quality portfolio and distinctive asset management skills driving performance
1 CMD 2018 Including the disposal of Telecom Italia assets secured in H1 2018 60 MILAN OFFICE PORTFOLIO
Focus on Milan Offices portfolio: 2.3 billion Group share M3
Offices Milan is a key component of portfolio with an increasing trend
M2 • Unique portfolio in Milan in terms of size, location and real estate quality M1
• Portfolio well diversified in most dynamic and active sub-markets Porta • Unparalleled offering, providing multiple prime solutions to tenants Nuova M5 Semi-center • Fully integrated property management skills offering the full suite of CBD property services M4
Center
Asset # Occupancy Periphery 53 97.0% 22% Center & GLA Semi-Center
645,000 Rented portfolio m² 59% Developments CBD & Porta Nuova 19% Periphery
CMD 2018 61 PORTFOLIO FEATURES
Five clusters building a unique portfolio in Milan
Relevant component of Trophy assets in primary locations Market Value 520 m Increasing Development pipeline MV Cash-flow-generating 385 m assets in fast-growing sub-markets MV 440 m Significant Reversionary potential component MV Long-term cash-flow 790 m Telecom Italia assets MV 145 m
CMD 2018 62 TROPHY PORTFOLIO
• Landmark assets in primary locations • Fully let assets with high-quality tenants and long-term leases • Relevant real estate value and potential boost for asset rotation => Target to sell 200 million in 2019
Asset # Market Gross 6 Value Yield Via Montebello 18 Piazza San Fedele 2 520 m 4.3% GLA WALB Occupancy 47,000 6.2 Y 100% m²
Via Cornaggia 10 Via Cernaia 8
CMD 2018 63 CASH-FLOW-GENERATING PORTFOLIO IN GROWING BUSINESS DISTRICTS
• Flexible properties in dynamic business districts in Milan • Fully let assets with prime tenants • Attractive yields and stable cash flows
Asset # Market Gross 17 Value Yield Via Scarsellini 14 440 m 6.1% GLA WALB Occupancy 159,000 5.8 Y 97% m²
Via Boscovich 18 Via Marostica 4
CMD 2018 64 REVERSIONARY POTENTIAL PORTFOLIO (1/2)
• CBD and growing sub-markets in Milan • Rental growth potential • Significant value upside through asset management actions
Corso Italia 19 Via Messina 38
Asset # Market Gross Potential 19 Value Yield Rent 790 m 4.4% 45.4 m GLA WALB Rent 149,000 5.8 Y m² 34.6 m
Total Capex forecasted Piazza S. Freud 1 Via Bernina 7 ~ 75 m
CMD 2018 65 REVERSIONARY POTENTIAL PORTFOLIO (2/2)
Milan Torri Garibaldi Milan Procaccini Center • Complex of two fully let towers (27 floors) intended for office use • Office complex comprised of by 4 connected towers • Multitenant asset currently underrented • Refurbishment activities on common areas, technical systems and facades
Market Rent Rent Rent Market Rent GLA 15.7 m WALB 18.5 m GLA 4.0 m WALB 4.8 m 44,700 1 9.1 Y 24,100 5.6 Y m² m²
Semi- Semi- center center CBD CBD Center Center
Periphery Periphery
CMD 2018 1 First end of the lease contract with Tecnimont in October 2019. First Covivio option to terminate the lease contract in October 2028 66 REVERSIONARY POTENTIAL PORTFOLIO: FUTURE DEVELOPMENT PIPELINE Milan Corso Italia Milan via Bernina 7 • Trophy asset located in a fast-growing area of the CBD • Office building located near an area under transformation (Scalo Farini) • Fully let with significant underrented • Heavy refurbishment: ~ 23 million capex • Heavy refurbishment: 29 million of capex
Rent Market Rent Market Rent Rent GLA 2.0 m WALB GLA 1.9 m WALB 4.8 m 3.1 m 11,900 1.0 Y 14,100 0.5 Y m² m²
Semi- Semi- center center CBD CBD Center Center
Periphery Periphery
CMD 2018 67 SIZABLE AND INCREASING COMMITTED DEVELOPMENT PIPELINE >40% CAGR IN 2 YEARS
- 126 m > 600m
+ 360 m
- 134 m 421 m + 238 m 317 m
+32% +56%
Dec 2017 Commitments Deliveries Dec 2018 Commitments Deliveries Dec 2019
~ 90,000 m² ~ 110,000 m² ~ 175,000 m² Yield on cost Yield on cost Yield on cost 6.2% 6.2% 6.6%
CMD 2018 68 EXTRACTING VALUE CREATION IN MILAN COMMITTED PIPELINE
1 Principe Amedeo 2 Via Dante1 7,000 m² │ 59 m│2019 4,800 m² │ 55 m│2019 5.3% yield on cost │57% prelet 4.8% yield on cost │first Wellio site in Milan
M3
Bicocca
M2 Certosa M1 Maciachini
Porta City Life Nuova
M5 Semi-center Lambrate / 1 Forlanini 3 The Sign CBD 2 4 Symbiosis (A+B & school) 26,500 m² │ 105 m│2020 M4 29,900 m² │ 114.5 m│ 2018-2020 7.1% yield on cost │35% prelet >7% yield on cost │89% prelet Lorenteggio Center Linate Airport 4 Navigli 3 Ripamonti
Periphery
Milanofiori
Business districts
CMD 2018 1 Values refer to office portion only, which will be redeveloped 69 SYMBIOSIS | AN AREA UNDER URBAN REGENERATION
DUOMO Cathedral
BOCCONI UNIVERSITY
LODI M3 CIRCLE FONDAZIONE PRADA PRADA new HQ LINE
TALENT GARDEN
BICYCLE LANE
NEW OFFICE HEADQUARTERS METRO LINE M3 STATION TRAM LINE 24 STOP OFFICE HEADQUARTERS FASHION HEADQUARTERS DEVELOPMENT MUSEUM MEDICAL RESEARCH NEW FUTURE OFFICE CMD 2018 MILANO PORTA ROMAN BUS LINE 34 PHARMACEUTICAL HEADQUARTERS UNIVERSITY 70 TRAIN STATION HEADQUARTERS & RESIDENTIAL DEVELOPMENT SYMBIOSIS | OVERALL PROJECT
Symbiosis is a landmark office development for the construction of a new business district of ~125,000 m². Target completion date in 2022. Currently working on masterplan update to move building capacity to North lot.
Total Project
Already Secured ~ 520 m Total budget
36.4 m Rent Already Delivered Value creation 7.0% Development of a school >30% Yield on cost part of NACE Group 9,400 m² Delivery 2020 >20% Value Value creation creation 97% prelet 13.5-year Buildings A&B >20% (Fastweb and Cirfood) 8.1% yield on cost 20,500 m² ~ 21 m total cost Delivery 2018 86% prelet 10.5-year 7.2% yield on cost Ongoing negotiations for approx. 50,000 m² CMD 2018 ~ 94 m total cost 71 THE SIGN | A VIBRANT AREA IN THE CITY
DUOMO Cathedral
TORTONA FASHION DISTRICT
FASHION HEADQUARTERS MUSEUM GYM BUS LINE 90 - 91 METRO LINE M2 STATION
MILANO S9 CMD 2018 OFFICE HEADQUARTERS SCHOOL / UNIVERSITY TRAM LINE 2 72 THE SIGN | OVERALL PROJECT
The Sign is a business district development in the southwestern Milan, consisting of 3 office buildings with a central square and a large green area for a total GLA of 26,500 m².
Total Project Building A Building A
9,700 m² 105 m Delivery beginning 2020 Total budget 96% prelet Building B 12-year 7.5 m 7% yield on cost Rent 38.3 m total cost
>7% Yield on cost Value creation >20% ~20% Value creation
Building C
Negotiations are in progress for a pre-letting on building B+C CMD 2018 73 LANDMARK DEVELOPMENT
Milan Principe Amedeo 5 Milan Via Dante 7 office portion
• Office building located between the CBD and the Porta Nuova • Trophy building located in the heart of the CBD with 4,800 m² of offices to be Business District. The M3 subway station is just in front of the asset. refurbished and 2,000 m² of retail fully let
• Heavy refurbishment works with construction of an additional attic • Heavy refurbishment works on the office part with redesign of the courtyard with floor, following the highest quality standard. Delivery Q1 2019. a glass canopy over the top and extension of the 6th floor. Delivery Q4 2019.
Total cost Total rent Value Total cost Total rent Value creation creation 59 m 3.1 m 55 m 2.6 m Launched ~25% GLA Pre-let ~20% GLA Capex Capex market activities 17 m 7,000 57% 13 m 4,800 m² m²
Semi- center Semi- center CBD CBD Center Center
Periphery Periphery
CMD 2018 74 EXIT FROM NON-CORE AND NON-STRATEGIC ACTIVITIES
Target to dispose by end of 2019 Target to dispose by 2022
ASSET MARKET VALUE ASSET MARKET VALUE RETAIL 13 298 m OUT OF 41 324 m (non-strategic) VACANCY GROSS YIELD MILAN 8% 5.9% (non-core) VACANCY GROSS YIELD 10% 6.4%
% of retail Yield portfolio Shopping malls 45% 8.2% In Turin, Rome, Bologna, etc. Milan retail 55% 4.3% & others
ACCELERATION OF ASSET ROTATION
► Focus on offices in Milan ► Improve growth potential ► Reduce impact of cost of vacancy
CMD 2018 75 EXIT FROM NON-STRATEGIC ACTIVITIES NEW LEASE AGREEMENT ON MILAN GALLERIA DEL CORSO
Mutual termination of the lease with COIN
Reletting to Gruppo Percassi Secret franchise network development in Italy
~ 5,000 m²
Rents: 5.9 m (~ 1,200/m²)
Lease term: 14 years firm, starting in February 2019
>+35%
Rental income
CMD 2018 76 CONTINUING TO OPTIMIZE TELECOM ITALIA PORTFOLIO
► Portfolio owned 51% by Covivio and 49% by Crédit Agricole Assurances and EDF Invest ► Target exposure of 20% of the total Italian portfolio already achieved
Trentino Alto Adige 2% 1% Friuli Venezia Giulia Aosta<1% Lombardia Veneto Gross 26% 13% Asset # Market Yield 7% Piemonte Value 7% Emilia-Romagna 130 3% 1.4 bn 6.4% Llguria Toscana4% Umbria 1% Marche GLA WALB 1%
Group 0.9 m 1% Abruzzo 710 m 12 Y Lazio share m² 13% 45M <1% Molise Campania 1% Puglia Sardegna 13% 2% Basilicata <1% 2022 strategy 2017-2018 activity 1% Calabria
2017: Syndication of the portfolio Decrease exposure & reinforce the core 4% Sicilia 758 million equivalent disposal quality component > Planned disposal of 1/3 of the portfolio
H1 2018: Disposals of non-core assets > Focus on main Italian cities and northern Italy in secondary location > Maintain long lease maturity 158 million of secured disposals > Keep control of the Telecom Italia portfolio, providing the relevant real estate services
CMD 2018 77 ACTIVE ASSET MANAGEMENT ON TELECOM ITALIA PORTFOLIO
Quality portfolio Portfolio liquidity 8% 8% 21% MILAN • Prime tenant ROME • Long-term lease contracts without break options NAPLES 11% WALB ~12 years TURIN North 36% 12% • Attractive valuation levels South 4% Low capital values (c. 1,500 / m²) Centre ~6.4% gross • Attractive location, top 4 cities 48% • 38 million capex deployment plan on core assets located mainly in Milan and Rome
CMD 2018 78 ACTIVE ASSET MANAGEMENT ON TELECOM ITALIA PORTFOLIO REVERSIONARY POTENTIAL Fully let assets significantly underrented
Milan Via Parini Milan corso Monforte • Located in Milan CBD • Located in Milan CBD • GLA 3,400 m² • GLA 7,100 m² • WALB 12 years • WALB 15 years
MARKET MARKET RENT RENT RENT RENT 1.3 m 2.4 m 0.7 m 2.1 m
Rome Corso V. Emanuele Milan via Tonale 11 • Located in historic city center • Located close to central railway station • GLA 6,700 m² • GLA 19,200 m² • WALB 15 years • WALB 12 years
MARKET MARKET RENT RENT RENT RENT 1.3 m 2.0 m 2.8 m 4.5 m
CMD 2018 Total share data 79 KEY TAKEAWAYS KEY TAKEAWAYS
LEADER IN MILAN SIGNIFICANT IN-HOUSE INTEGRATED AND REPUTABLE QUALITY OFFICES GROWTH POTENTIAL PLAYER
Top-quality portfolio Strong value creation potential needs through rent reversion and Focus on CBD and main development pipeline Fully integrated and experienced business districts of Milan local team Active asset rotation dynamic
CMD 2018 81 III. FOCUS ON HOTELS III.A. PRESENTATION OF THE EUROPEAN HOTEL MARKET BY MKG
Vanguelis Panayotis COO of MKG Group and CEO of MKG Consulting & OlaKala Before joining MKG Group, Vanguelis held several positions in hotel operations with various international hotel chains. He joined MKG Group in 2001, first managing various in-house and multi-dimensional projects. He now works with the consulting teams and contributes to all major projects undertaken by MKG.
About MKG Group Founded in 1985, MKG Group is currently the leader in marketing studies for the European hotel and tourism market.
CMD 2018 83 CAPITAL MARKET DAY HOSPITALITY INDUSTRY
October 18, 2018 From a long-term perspective, tourism is booming
International tourist arrivals by decade since 1980 And 2020-30 UNWTO forecasts (milion / year)
Europe Asia-Pacific North America Middle East & Africa Central & Latin America
2000
1800
1600
1400
1200
1000
800
600
400
200
0 1980 1990 2000 2010 2020 2030 Sources: UNWTO 2018
MKG CONSULTING COVIVIO - CAPITAL MARKET DAY 85 From a long-term perspective, tourism is booming
Daily air passenger traffic in major global airports
/
10,000
230,000
Sources: Airbus - 2014
MKG CONSULTING COVIVIO - CAPITAL MARKET DAY 86 From a long-term perspective, tourism is booming
Daily air passenger traffic in major global airports
/
10,000
230,000
Sources: Airbus - 2014
MKG CONSULTING COVIVIO - CAPITAL MARKET DAY 87 Chains structured the market
Room supply of Top 10 hotel groups worldwide 2014
686,873
672,083
662,821
645,423
506,058
461,719
339,246
314,318
256,555
168,863
0 200,000 400,000 600,000 800,000 1,000,000 1,200,000 Source: Hospitality ON database – 01/2014
MKG CONSULTING COVIVIO - CAPITAL MARKET DAY 88 Chains structured the market
Room supply of Top 10 hotel groups worldwide 2015
710,295
708,268
701,899
660,826
504,808
482,296
346,599
302,144
296,075
241,910
0 200,000 400,000 600,000 800,000 1,000,000 1,200,000 Sources: Hospitality ON database – 01/2015
MKG CONSULTING COVIVIO - CAPITAL MARKET DAY 89 Chains structured the market
Room supply of Top 10 hotel groups worldwide 2016 2016
(post-M&A) 1,108,852
751,350
744,368
678,042
555,544
554,508
507,246
345,504
311,870
278,843
0 200,000 400,000 600,000 800,000 1,000,000 1,200,000 Sources: Hospitality ON database – 01/2016
MKG CONSULTING COVIVIO - CAPITAL MARKET DAY 90 Chains structured the market
Room supply of Top 10 hotel groups worldwide 2017
1,169,902
796,440
767,135
697,607
602,000
583,782
516,122
389,000
331,347
293,416
0 200,000 400,000 600,000 800,000 1,000,000 1,200,000
Sources: Hospitality ON database – 01/2017
MKG CONSULTING COVIVIO - CAPITAL MARKET DAY 91 Chains structured the market
Room supply of Top 10 hotel groups worldwide 2018
1,235,512
848,014
798,075
794,572
680,111
636,965
525,573
377,773
357,117
290,868
0 200,000 400,000 600,000 800,000 1,000,000 1,200,000 Sources: Hospitality ON database – 01/2018
MKG CONSULTING COVIVIO - CAPITAL MARKET DAY 92 Chains structured the market
Room supply of Top 10 hotel groups worldwide 2018
2018 (post-M&A)
1,235,512
862,303
848,014
798,075
794,572
636,965
525,573
377,773
357,117
290,868
0 500,000 1,000,000 Sources: Hospitality ON database – 01/2018
MKG CONSULTING COVIVIO - CAPITAL MARKET DAY 93 Brand diversification
MKG CONSULTING COVIVIO - CAPITAL MARKET DAY 94 Brand diversification
MKG CONSULTING COVIVIO - CAPITAL MARKET DAY 95 Where are the structured markets?
Penetration of chains
>60% >50% >40% >20% >10% >0% NA
Sources: EuropeanHospitality Report – 10/2018
MKG CONSULTING COVIVIO - CAPITAL MARKET DAY 96 Europe, room for structuration
73% 47% 33% (EU)
43% Chains: 11M
Independent: 14M
Source: MKG Consulting database – 12/2017
MKG CONSULTING COVIVIO - CAPITAL MARKET DAY 97 Chains structured the market
Hotel room supply In the EU 27 + UK
4,500,000 +1.3% overall CAGR 4,000,000
3,500,000
3,000,000 +0.7% CAGR 2,500,000
2,000,000
1,500,000
1,000,000 +2.8% CAGR 500,000
0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Chains Independent hotels Sources: Eurostat, European Commission, European Hospitality Report – 10/2018
MKG CONSULTING COVIVIO - CAPITAL MARKET DAY 98 Starting off earlier in some countries Hotel room supply In France
800,000 +0.9% overall CAGR 700,000
600,000 -0.6% 500,000 CAGR
400,000
300,000
200,000 +4.2% CAGR 100,000
0
Chains Independent hotels
Sources: European Hospitality Report – 10/2018
MKG CONSULTING COVIVIO - CAPITAL MARKET DAY 99 An answer to alternative accommodation?
MKG CONSULTING COVIVIO - CAPITAL MARKET DAY 100 Airbnb: penetration of the market through its edges
% of total supply, breakdown by rate positioning Hotels vs Airbnb
Paris AirBnB Paris hotels 16%
14%
12%
10%
8%
6%
4%
2%
0%
Source: HotelCompset, OlaKala_Marketshare – 7/2016
MKG CONSULTING COVIVIO - CAPITAL MARKET DAY 101 New and perennial market dynamics
MKG CONSULTING COVIVIO - CAPITAL MARKET DAY 102 European trends
RevPar growth rate 2017 by country European RevPAR +5.7%
> 10%
5% to 10%
2% to 5%
0% to 2%
<0% Sources: OlaKala_Marketshare – 10/2018
MKG CONSULTING COVIVIO - CAPITAL MARKET DAY 103 European trends
RevPar growth rate YTD 08/2018 by country European RevPAR +4.0%
> 10%
5% to 10%
2% to 5%
0% to 2%
<0%
Sources: OlaKala_Marketshare – 10/2018
MKG CONSULTING COVIVIO - CAPITAL MARKET DAY 104 European focus
Evolution of the indicators of activity Since 2000 in Europe
15%
10%
5%
0%
-5% 2004-2008 : ADR 2010-2016 : ADR growth growth 4%/year 2%/year -10%
-15%
-20%
OR Change ADR Change RevPAR Change
Sources: OlaKala_Marketshare – 10/2018
MKG CONSULTING COVIVIO - CAPITAL MARKET DAY 105 What happened since the financial crisis? RevPAR Base 2007 = 100
140
130
120
110
100
90
80
70
60 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 YTD 07/2018
Sources: MKG Consulting / OlaKala_Marketshare – 10/2018
MKG CONSULTING COVIVIO - CAPITAL MARKET DAY 106 From a longer-term perspective, different takeaways RevPAR Base 2000 = 100
180
160
140
120
100
80
60 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Sources: Hospitality ON ( European Hospitality Report ), OlaKala_Marketshare – 10/2018
MKG CONSULTING COVIVIO - CAPITAL MARKET DAY 107 Economic growth, an engine for hotel supply
Number of hotel room and GDP ( billion Dollars ) Per country rooms
10,000,000
1,000,000
100,000
10,000 Log scale x10
1,000
100 GDP (Bn$) 0 1 10 100 1,000 10,000 100,000
Sources: MKG Consulting database, World Bank – 10/2018
MKG CONSULTING COVIVIO - CAPITAL MARKET DAY 108 Growth, a key underlying factor
Annual GDP growth by country / region (in %) 2000 - 2017
Germany Change in RevPAR Change in GDP
25% 6%
20% 4% 15%
10% 2% 5%
0% 0%
-5% -2% -10%
-15% -4% -20%
-25% -6% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
RevPAR GDP
Sources: European Commission, European Hospitality Report, OlaKala_Marketshare – 10/2018
MKG CONSULTING COVIVIO - CAPITAL MARKET DAY 109 Growth, a key underlying factor
Annual GDP growth by country / region (in %) 2000 - 2017
UK
Change in RevPAR Change in GDP
25% 6%
20% 4% 15%
10% 2% 5%
0% 0%
-5% -2% -10%
-15% -4% -20%
-25% -6% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
RevPAR GDP
Sources: European Commission, European Hospitality Report, OlaKala_Marketshare – 10/2018
MKG CONSULTING COVIVIO - CAPITAL MARKET DAY 110 Growth, a key underlying factor
Annual GDP growth by country / region (in %) 2000 - 2017
France
Change in RevPar Change in GDP
25% 6%
20% 4% 15%
10% 2%
5%
0% 0%
-5% -2% -10%
-15% -4%
-20%
-25% -6% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
RevPAR GDP
Sources: European Commission, European Hospitality Report, OlaKala_Marketshare – 10/2018
MKG CONSULTING COVIVIO - CAPITAL MARKET DAY 111 Growth, a key underlying factor
Annual GDP growth by country / region (in %) 2000 - 2017
Spain
Change in RevPar Change in GDP
25% 6%
20% 4% 15%
10% 2% 5%
0% 0%
-5% -2% -10%
-15% -4% -20%
-25% -6% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
RevPAR GDP
Sources: European Commission, European Hospitality Report, OlaKala_Marketshare – 10/2018
MKG CONSULTING COVIVIO - CAPITAL MARKET DAY 112 Growth, a key underlying factor
Annual GDP growth by country / region (in %) 2000 - 2017
Italy
Change in RevPar Change in GDP
25% 6%
20% 4% 15%
10% 2%
5%
0% 0%
-5% -2% -10%
-15% -4%
-20%
-25% -6% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
RevPAR GDP
Sources: European Commission, European Hospitality Report, OlaKala_Marketshare – 10/2018
MKG CONSULTING COVIVIO - CAPITAL MARKET DAY 113 Topline performances vs inflation
Annualized evolution of the indicators of activity vs inflation Compound growth for an investment since year [xxxx] in Europe
6%
5%
4%
3% 2.8%
2%
1%
0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Annualized ADR growth since inception in… (CAGR, %) Annualized RevPAR growth since inception in… (CAGR, %) Annualized Inflation HICP (CAGR, %) Average RevPAR CAGR growth, holding >10Y
Sources: OlaKala_Marketshare – 10/2018
MKG CONSULTING COVIVIO - CAPITAL MARKET DAY 114 Topline performances vs inflation
Annualized evolution of the indicators of activity vs inflation Compound growth for an investment since year [xxxx] in the United Kingdom
6%
5%
4% 3.8%
3%
2%
1%
0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Annualized ADR growth since inception in… (CAGR, %) Annualized RevPAR growth since inception in… (CAGR, %) Annualized Inflation HICP (CAGR, %) Average RevPAR CAGR growth, holding >10Y
Sources: OlaKala_Marketshare – 10/2018
MKG CONSULTING COVIVIO - CAPITAL MARKET DAY 115 Topline performances vs inflation
Annualized evolution of the indicators of activity vs inflation Compound growth for an investment since year [xxxx] in Germany
6%
5%
4%
3% 3.0%
2%
1%
0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Annualized ADR growth since inception in… (CAGR, %) Annualized RevPAR growth since inception in… (CAGR, %) Annualized Inflation HICP (CAGR, %) Average RevPAR CAGR growth, holding >10Y
Sources: OlaKala_Marketshare – 10/2018
MKG CONSULTING COVIVIO - CAPITAL MARKET DAY 116 Topline performances vs inflation
Annualized evolution of the indicators of activity vs inflation Compound growth for an investment since year [xxxx] in France
6%
5%
4%
3%
2% 2.2%
1%
0%
-1%
-2% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Annualized ADR growth since inception in… (CAGR, %)
Annualized RevPAR growth since inception in… (CAGR, %) Annualized Inflation HICP (CAGR, %)
Sources: OlaKala_Marketshare – 10/2018
MKG CONSULTING COVIVIO - CAPITAL MARKET DAY 117 Topline performances vs inflation
Annualized evolution of the indicators of activity vs inflation Compound growth for an investment since year [xxxx] in Spain
Sources: OlaKala_Marketshare – 10/2018
MKG CONSULTING COVIVIO - CAPITAL MARKET DAY 118 Topline performances vs inflation
Annualized evolution of the indicators of activity vs inflation Compound growth for an investment since year [xxxx] in Italy
6%
5%
4%
3%
2%
1% 1.1%
0%
-1%
-2%
-3% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Annualized ADR growth since inception in… (CAGR, %) Annualized RevPAR growth since inception in… (CAGR, %) Annualized Inflation HICP (CAGR, %) Average RevPAR CAGR growth, holding >10Y
Sources: OlaKala_Marketshare – 10/2018
MKG CONSULTING COVIVIO - CAPITAL MARKET DAY 119 Key takeaways on the European hotels markets
01 02 03
Positive trend supported by Hotels vs GDP and Strong fundamentals the economic growth and ongoing inflation: correlation prospects and the increase and overperformance mutations of the chains’ penetration
MKG CONSULTING COVIVIO - CAPITAL MARKET DAY 120 MKG CONSULTING COVIVIO - CAPITAL MARKET DAY 121 III.B STRATEGY IN HOTEL REAL ESTATE CONTENTS
1. COVIVIO: A EUROPEAN LEADER IN HOTEL REAL ESTATE 2. ASSET MANAGEMENT STRATEGY a. OPTIMIZE THE HOTEL PERFORMANCE b. RENTAL UPSIDE c. REAL ESTATE POTENTIAL
3. KEY TAKEAWAYS
CMD 2018 123 1. COVIVIO A EUROPEAN LEADER IN HOTEL REAL ESTATE LEADING PLAYER IN EACH OF THE MAJOR EUROPEAN MARKETS
388 hotels Covivio owns a 5.9 bn hotel portfolio 46,777 rooms ( 2.3 bn Group share) Critical size in each of our markets through its subsidiary Covivio Hotels Belgium & Netherlands United Kingdom ► Founded by Covivio in 2005 0.5 bn GAV Germany ► French SCA regime (limited partnership) with Covivio 1.0 bn GAV as General & Managing Partner ( associé gérant 1.5 bn GAV
Shareholding structure France 42% 17% 2.2 bn GAV Crédit Agricole Assurances
8% ACM Free float 4% Spain & Portugal
Generali 9% 11% 5% CDC 5% Cardif 0.7 bn GAV Since Sogecap (BNP Paribas) 2018 Since 2018
CMD 2018 1 At mid-2018 including the hotel acquisition in the UK 125 MANAGEMENT TEAM: LONGSTANDING SPECIALISTS IN HOTEL REAL ESTATE
Dominique Ozanne (40) Gaël Le Lay (45) Elsa Tobelem (37) Managing Director of Covivio Hotels Deputy MD of Covivio Hotels CIO of Covivio Hotels & Deputy CEO of Covivio 18 years in Hotel Investments 12 years in Hotel Investments at Covivio 13 years in Hotel Investments at Covivio of which 5 years at Covivio
Dominique began his career at Covivo in 2003 as Head of Gaël worked 11 years at Accor, 5 years in Audit and 6 Elsa has been working for Covivio Hotels for 12 years, Projects for the CEO. years in M&A Department. He then headed the Hotel working as Development and Asset Manager. She He was involved in the formation of Covivio Hotels in 2005 as Division of Axa Real Estate for 7 years. He joined now heads the Investment Department and has Chief Operating Officer. Since 2011, he has been Managing Covivio Hotels in 2013. actively participated in the transformation of Director of Covivio Hotels hotel portfolio through major investments in the last years in Germany, Spain and the UK. In 2018, Dominique was appointed Deputy CEO of Covivio
CMD 2018 126 STRATEGY: CONSOLDIATE OUR LEADERSHIP STATUS AND UNLOCK GROWTH
Westin - Berlin Grand Central - Glasgow Motel One - Paris 1 2 3 Focus on major Client centric: be the Unlock growth potential European cities and the preferred partner of the in our portfolio through active most profitable hotels major operators asset management
CMD 2018 127 A WELL-ORIENTED HOTEL MARKET OFFERING LEVERAGE FOR REAL ESTATE OWNER
Covivio is a key player for most of the chain operators The Travel & Tourism industry is experiencing momentum and 1 giving us the ability to: growing at an unprecedented pace
Work with the best partners
2 Chain operators are competing to gain a foothold in central Choose the best revenue structure for our assets and new locations while revamping their offer (lease or management contract)
Grow our revenues
3 There is a scarcity of long-term real estate owners able to fully support operators
CMD 2018 128 A WELL-DIVERSIFIED EUROPEAN FOOTPRINT FOCUSED ON MAJOR CITIES
80% major European cities (cities with more than 2 million overnight stays annually)
Major German cities Major UK cities Berlin, Dresden & Leipzig, Frankfurt, Munich, etc. Germany 28% London, Edinburgh, Glasgow, Oxford, etc.
UK 16% % in revenue1 France 33% Spain ~80% in Barcelona & Madrid 13%
Portugal Belgium & Netherlands Mainly Paris and major regional cities 1% 9% Lyon, Marseille, etc.
Mainly Brussels & Amsterdam
1 CMD 2018 Group Share, annualized rent and EBITDA (for operating properties). At end-June 2018 including the hotel acquisition in the UK at run-rate 129 WELL DIVERSIFIED WITH THE LEADING OPERATORS
Long-term partnerships with the best operators in each country through a diversified tenant base
#8 #1 #x Ranking as European Operators In terms of rooms, 2017 (Hospitality On) Subsidiary of Jin Jiang (#5th largest global operator) Leader in France & historical partner One of the global leaders in midscale/upscale hotels
#2 #3 Accor 24% Radisson 8% One of the global leaders in midscale/upscale hotels Leader in the UK in midscale/upscale segments
Marriott 9% IHG % in revenue1 #9 18% NH 5%
Hotusa 3% In France #3 Barcelo 3% B&B One of the leaders in Spain & Germany and a growing player 16% Other 15% in the Netherlands
One of the leaders in France and Germany in Meininger, Motel One, etc. the economic segment
CMD 2018 1 Group Share, annualized rent and EBITDA (for operating properties). At end-June 2018 including the hotel acquisition in the UK at run-rate 130 SUCCESSFUL LONG-TERM PARTNERSHIPS: ACCORHOTELS
A 1.1 bn lease portfolio 74 hotels in France (89%) & Belgium (11%)
2005-2006 1st sale and leaseback of Accor
► Acquisition of 123 assets with 12-year leases
► Variable rents indexed on hotel revenues
2015-2016 Lease extension and quality improvement
► Extension of the lease: +12 years firm at passing rents
► Disposal of 45 hotels with low performances in secondary locations Disposal price: 361 million
Tomorrow ► Asset management alongside Accor to increase RevPar growth & rents ► Extract additional value from the portfolio Mercure - Paris
CMD 2018 131 NEW PARTNERSHIP WITH A LEADER: IHG
2018: acquisition of 14 hotels 4* and 5* hotels in the major UK cities for 976 million1 Prime locations in city-centers
Lease agreement with IHG
► 25-year triple net lease ► 5.0% yield on minimum guarantee fully indexed ► Variable component: 6.0% target yield Edinburgh
Capex program by IHG to implement its new brands
New upscale brand Luxury lifestyle brand Development projects
1 CMD 2018 £858 million with a conversion rate of 1.14 at 02/05/2018; €413 million Group share 132 PARTNER OF MEININGER THROUGH DEVELOPMENTS Accompany Meininger to find attractive locations in the city centers of major cities More than 60 European cities currently targeted by Meininger
1 HOTEL DELIVERED in Milan
3 UNDER DEVELOPMENT in Paris, Munich & Lyon
Meininger Porte de Vincennes, Greater Paris
100 MILLION TOTAL COST1 6.2% average yield on cost
Meininger Lyon Zimmermann
1 CMD 2018 On the 3 Meininger hotels under development. €42 million Group share 133 STRONG QUALITY OF THE PORTFOLIO
Focus on major European Higher quality of hotels cities1 80%2 73%2
% of assets in major 65% European cities % of upscale and midscale (mainly 4* and 5*) 53% 54% 58%
2015 2016 H1 2018 2015 2016 H1 2018
Target 100% by 2022 Target 75% by 2022
George Street - Edinburgh
CMD 2018 1 Cities with more than 2 million overnight stays per year 134 2 At H1 2018; Including the acquisition of the UK Hotel portfolio AN OPTIMIZED MIX BETWEEN TYPES ► Covivio owns all the assets it rents or operates ► Optimized balance between secured cash-flows (fixed leases) and capacity to catch hotel market growth (variable revenues)
, Real Estate owner Revenues1
53% 47%
Fixed indexed lease Variable revenues Secured and stable income Taking full advantage of the structural upward trends of the hotel industry
21% 26%
Revenue based on Revenue based on turnover2 Net Operating Income Mostly with Accor, based on a Mostly trophy assets in core location (Berlin) percentage of turnover Full flexibility: ability challenge and change the operator
Management Contract Lease Lease contract
CMD 2018 1 Annualized H1 2018 figures, including the hotel acquisition in the UK at run-rate 135 2 Includes the variable part of leases with guaranteed minimum rent BENEFITS FROM GEOGRAPHIC DIVERSIFICATION
Geographic diversification offers the best strategy to reap-off the benefits of overall long-term dynamics, while protecting against the specific volatility of each country
160 RevPar change since 2010 199 150 185 141 Covivio current mix portfolio 140 139 165 138 CAGR: +4.7% 130 136 145 125 120 125 110 Country weightings in 105 Covivio Hotel portfolio 100 100 (% of turnover)2
90 85 France 33% Germany 28% 80 65 UK 16% H1 2018 2010 2011 2012 2013 2014 2015 2016 2017 S1 2018 Spain 12% WeightedWeighted RevparRevpar performanceperformance in in Covivio Covivio Hotel Hotels portfolio France Germany UK Belgium Spain Belgium 7% current mix portfolio Other 3%
1 CMD 2018 Revenue Per Available Room, RevPar at country level 136 2Group Share, annualized figures. At end-June 2018 (EBITDA for operating properties) including the hotel acquisition in the UK at run-rate Source: MKG HOTEL PORTFOLIO: HIGH AND SECURED REVENUE YIELD
► Hotel real estate is key to the operating activity of operators ► Valuation of the business is tied to real estate
Lease properties Operating properties (owned and leased to 3rd parties) (owned and operated)
> Gross yield1 5.2% > EBITDA yield 6.5% > Covivio Hotels EBITDA margin 92%
> Controlled capex Mostly borne by the operator 4-5% of turnover (average capex reserve/year) 1% of the rent for the owner
All assets are occupied since the beginning > Occupancy rate (lease) 100% and generate cash-flows
Long-term contracts with 2 > Lease maturity 14 years > 10 years since 2015 flexibility based on operator results
CMD 2018 1 At end-June 2018; ;2 Including the acquisition in the UK 137 Photo hotel 2. ASSET MANAGEMENT STRATEGY SCREENING THE PORTFOLIO TO MAXIMIZE THE RETURN
Catalyst Main criteria Asset management action
Operating performance Capex to unlock RevPar growth (EBITDA margin >30%, etc.) Benefit from the flexibility offered by the contracts Client feedbacks Dynamic asset rotation A. Optimize the hotel performance (Booking, Trip Advisor, etc.)
Change the contract with the operator Capacity to increase the rent Capex program alongside the operator B. Rental upside
Additional constructability Potential value Change of use (conversion into Office/Hotel/Resi) Use of the surface Additional activities (ground-floor coworking) C. Real estate potential
CMD 2018 139 SCREENING THE PORTFOLIO TO MAXIMIZE THE RETURN
Catalyst Main criteria Asset management action
Operating performance Capex to unlock RevPar growth (EBITDA margin >30%, etc.) Benefit from the flexibility offered by the contracts Client feedbacks Dynamic asset rotation A. Optimize the hotel performance (Booking, Trip Advisor, etc.)
CMD 2018 140 A. PERFORMANCE OF THE HOTEL | CAPEX TO UNLOCK REVPAR GROWTH Berlin - Park Inn Alexanderplatz case study New panoramic suite
Growth through room creation 4* HOTEL Transformation of meeting rooms 1,028 ROOMS into 16 suites with panoramic views >90% OCCUPANCY ADR1 of 165 + 0.6 m EBIDTA/year RATE vs for 81 for standard rooms 2.3 m of capex
Standard renovated room Growth through renovation
Refurbishment of 651 rooms in 2017 and 2018
+ 2.3 m revenue/year ADR1 +9% for 3.6 m of capex
+13% value creation
1 CMD 2018 since acquisition in 2016 Average Daily Rate; YTD august 16 vs YTD august 18 141 A. PERFORMANCE OF THE HOTEL | CHALLENGE AND CHANGE THE OPERATOR Case study of the flexibility between lease and management contracts
Première Classe 9 hotels 750 rooms Secondary locations 2015 2018 2019
Management contract Lease contract with Louvre Hotels with another European operator Long term firm lease of 20 years EBITDA margin of 35% Variable rent with a guaranteed minimum +28% value creation since acquisition Expected EBITDAR margin > 50%
► Secured cash flows on 20 years ► Improvement of the return of the hotels
CMD 2018 142 A. PERFORMANCE OF THE HOTEL | DYNAMIC ASSET ROTATION Dresden Ibis case study
Sale of Ibis Lilienstein (306 rooms) for 16.2 million After Increase in operating performances 2 hotels and of the value of the two remaining hotels 612 rooms Before 3 hotels 918 rooms EBITDA in M +20%
EBITDA margin EBITDA margin 35% (+9 pts) 26%
+26% value creation since acquisition in 2016 (of which +11% on the disposal)
CMD 2018 143 SCREENING THE PORTFOLIO TO MAXIMIZE THE RETURN
Catalyst Main criteria Asset management action
Change the contract with the operator Capacity to increase the rent Capex program alongside the operator B. Rental upside
CMD 2018 144 B. RENTAL UPSIDE: CHANGE THE CONTRACT WITH THE OPERATOR Madrid Independent hotel case study
4* hotel - 205 rooms Hotel leased to an independent operator
Prime Central location close Low rent to Museo del Prado location
15 offers received to change the tenant > Selection of RADISSON
20 years new fixed lease term
+53% increase of the fixed rent
7 m of renovation capex to be paid by the tenant
► >50% expected value creation since acquisition in 2017
CMD 2018 145 B. RENTAL UPSIDE: CAPEX PROGRAM ALONGSIDE THE OPERATOR Spain - Barcelo Corralejo Bay case study
4* hotel - 98 rooms A renovation program financed mainly by Covivio Hotels (70 %) in the Canary Islands
of capex 4 m mainly renovation of rooms and common areas
+16 years on the fixed lease term
+30% increase of the fixed rent
► +19% of expected value creation net of capex since acquisition in 2017
CMD 2018 146 B. FURTHER RENTAL UPSIDE
Our portfolio hides strong rental upside
Current Rent to EBITDAR ratio of our French, German, Belgian and Dutch portfolio 52% (66% of the lease portfolio)
Market level 70%
Rent reversion potential +34%
+78% +52% +51% +39% +44% +16% +14%
Amsterdam Berlin Bordeaux Paris Frankfurt Brussels Marseille
Catalysts to catch the reversionary potential: ► Capex program alongside the operator ► New lease agreement CMD 2018 ► Move into management contract 147 SCREENING THE PORTFOLIO TO MAXIMIZE THE RETURN
Catalyst Main criteria Asset management action
Additional constructability Potential value Change of use (conversion into Office/Hotel/Resi) Use of the surface Additional activities (ground-floor coworking) C. Real estate potential
CMD 2018 148 C. ADDITIONAL CONSTRUCTABILITY
► Potential constructability in the Hotels to be valued ► More than 230,000 m² additional surfaces to be developed into offices, hotels and residential
15 100,000 m² 130,000 m² projects in additional land bank in Europe constructability Berlin
Paris Lyon Dresden of which 70,000 m² to be committed in 2019 Oxford Leipzig Park Inn Alexanderplatz - Berlin
CMD 2018 149 C. ADDITIONAL CONSTRUCTABILITY CASE STUDIES (1/2)
Ibis Styles Paris Bercy Development of a 9,500 m² building 3-star hotel 100% hotel, with a new type of offer such as 364 rooms lodging/hotel mix Dynamic location in Paris
Ibis Lyon Part-Dieu Construction of a 120 m-high new 3-star hotel building 144 rooms Hotel and Offices Prime location in Lyon
CMD 2018 150 C. ADDITIONAL CONSTRUCTABILITY CASE STUDIES (2/2)
Westin Leipzig Land bank to develop 30,000 m² 4-star hotel 436 rooms Mix of Offices/Residential/Hotels
Westin Dresden Land bank to develop 8,000 m 4-star hotel ² 340 rooms Residential
York Constructability on 1,150 m² 4-star hotel 155 rooms & potential extension of 45 rooms
CMD 2018 151 KEY TAKEAWAYS KEY TAKEAWAYS
A well oriented market with robust fundamentals
A diversified European leader, partner of the hotel operators
A balanced profile between revenue security and growth
Pursuit of development in the major European cities through a disciplined investment policy and opportunities brought by the operators
Extensive organic growth potential through asset management drivers
Synergies with office and residential Eurostars Grand Marina - Barcelona
CMD 2018 153 UPCOMING EVENTS
Q3 ACTIVITY 25 October 2018
FY 2018 RESULTS 21 February 2019
CMD 2018 154 IV. MILAN PROPERTY TOUR CONTENTS
PROPERTY TOUR
1. Symbiosis 158
2. Via Dante 7 159
3. Via Torino 21 160
4. Galleria del Corso 4 161
5. Piazza San Fedele 2 162
6. Piazza San Fedele 4 163
7. Via Principe Amedeo 5 164
8. Via Montebello 18 165
9. Garibaldi Towers 166
CMD 2018 156 ASSETS OVERVIEW Property tour 1 Symbosis 6 Piazza San Fedele 4
Sesto San Giovanni 2 Via Dante 7 7 Via Principe Amedeo 5 M3 3 Via Torino 21 8 Via Montebello 18
Cernusco / 4 Galleria del Corso 9 Garibaldi Towers Bicocca Vimodrone 5 Piazza San Fedele 2
M2 Certosa M1 Maciachini
9
City Life Porta Nuova Segrate M5 Semi-center Lambrate / 8 7 Forlanini 5 6 2 4 M4 3 CBD TOTAL MARKET Lorenteggio Linate Airport Center VALUE OF 1.3 bn Representing >50% 1 of Milan portfolio Ripamonti Navigli
Periphery
San Donato Milanese
Milanofiori
CMD 2018 157 SYMBIOSIS
Symbiosis is a landmark office development located in southern Milan, on the main ring road of the city, only 2.8 km far from Duomo Square and very easily accessible through public transport.
Overview Semi- CBD center ► Total GLA: ~125,000 m² Center ► Main Tenants: Fastweb, CIR Food, Ludum ► Completion: 2018/2022 Periphery
Major strengths of the asset
► Strategic location, easily accessible through public transport ► Smart cities: green solutions ► Fastweb HQ certified LEED Platinum Total cost Value Rating: AAA creation Strategy 520 m Yield on >20% ► Active collaboration with municipality in order to obtain more cost flexibility on the masterplan to accelerate the project ► Active role on Scalo Porta Romana and Horizon 2020 project 7.0%
CMD 2018 158 VIA DANTE 7
Via Dante 7 is located in the heart of the city center, in an area that also has a strong service and retail appeal, and is accessible by several metro stops. The office spaces will be completely refurbished. Semi- CBD center Overview Center
► Total GLA: office ~ 4,800 m² to be refurbished + Periphery retail ~ 2,000 m² ► Completion: Q4 2019 Office
Major strengths of the asset Total Value Cost ► Trophy building in the heart of CBD creation Yield on ► Located next to recently redeveloped Cordusio 55 m cost ~25% area Capex 4.8% ► Pedestrian area 13 m
Strategy Retail
► Complete refurbishment of office spaces including redesign of the courtyard with a glass canopy over the top to create a luxurious entrance and extension of the Occupancy Yield 6th floor to create conference facilities 100% WALB 3.5% ► First Wellio site in MIlan 4.1 YEARS
CMD 2018 159 VIA TORINO 21
Via Torino 21 is located in the heart of the city center, near Piazza Duomo, an area that also has a strong retail appeal. The property has a basement, ground floor and part of the mezzanine floor with an intended retail use while the remaining spaces are used as offices.
Overview Semi- CBD center ► Total GLA: ~ 7,200 m² Center ► Main Tenants: Saras, , Mango Periphery
Major strengths of the asset
► Optimal location next to Duomo Square ► Efficient floor area ► Recently refurbished
Occupancy Rent Strategy 100% 4.3 m WALB ► Potential rent upside on office spaces ► Potential transformation into retail of part of the 3.9 mezzanine YEARS
CMD 2018 160 GALLERIA DEL CORSO 4
Galleria del Corso is a high-street retail iconic building located in a strategic area in the city center. A unique shopping destination, made by transforming a historical cinema and theater complex (built in 1902), which was subject to complete renovation in 2010 (concept signed by Jean Nouvel).
Overview Semi- CBD center ► Total GLA: ~ 5,000 m² Center ► Main Tenants: recently relet to Hexagon Periphery
Major strengths of the asset
► High street retail iconic building ► High visibility ► Central retail location on Corso Vittorio Emanuele II
Occupancy Rent Strategy 100% 6.0 m ► Recently relet to a major tenant it will become the WALB Italy 14.3 YEARS
CMD 2018 161 PIAZZA SAN FEDELE 2
Piazza San Fedele 2 is located in the heart of the CBD next to Piazza Duomo and Piazza della Scala. The building was recently refurbished and includes 6 floors above ground and 2 basement levels with large retail spaces on the ground floor.
Overview Semi- CBD center ► Total GLA: ~ 5,100 m² Center ► Main Tenants: Ashurst, BlackRock Periphery
Major strengths of the asset
► Trophy asset ► Excellent location both for office and retail ► Good public transport connection
Occupancy Rent Strategy 100% 3.9 m ► Increase the sustainability of the asset WALB ► Extend the current lease contracts 2.9 YEARS
CMD 2018 162 PIAZZA SAN FEDELE 4
Piazza San Fedele 4 is located in the heart of CBD next to Piazza Duomo and Piazza della Scala. The property is let to Creval Bank and is now under complete refurbishment.
Overview Semi- CBD center ► Total GLA: ~ 3,500 m ² Center ► Main Tenant: Creval Bank Periphery
Major strengths of the asset
► Trophy asset ► Excellent location both for office and retail ► Good public transport connection
Occupancy Rent Strategy 100% 2.3 m ► General refurbishment of the whole complex WALB ► Potential change of use of part of ground floor to retail 8.0 YEARS
CMD 2018 163 VIA PRINCIPE AMEDEO 5
Principe Amedeo 5 is a historical building built in 1850 and now under heavy refurbishment. The property is set in an excellent location between the CBD and Porta Nuova business district.
Overview Semi- CBD center ► Total GLA: ~ 7,000 m² Center ► Pre-let (57%): Gattai, Minoli, Agostinelli law firm ► Completion: Q1 2019 Periphery
Major strengths of the asset
► Trophy office building ► M3 subway stop just in front of the entrance ► Leed certificate «Gold», «A» energy class
Total Cost Value Strategy 59 m creation ~20% ► Complete refurbishment of the entire asset following the Capex Yield on highest quality standard and the construction of an additional 16 m cost attic floor 5.3%
CMD 2018 164 VIA MONTEBELLO 18
Via Montebello 18 was built in 1970 and it is located right in the heart of the city center, between the new Porta Nuova business district and the renowned Brera District.
Overview Semi- CBD center ► Total GLA: ~ 18,500 m² Center ► Tenant: Intesa Sanpaolo Periphery
Major strengths of the asset
► Historic building ► Good location and visibility ► Recently fully relet to mono tenant
Strategy Occupancy Rent 100% 7.7 m ► Refurbishment activities ongoing WALB 7.9 YEARS
CMD 2018 165 GARIBALDI TOWERS
Garibaldi Towers is a 2 towers office complex; each tower is 27 floors above ground and 120 m-high, and they are two of the tallest buildings in Milan. The property was built between the end of 1980 and the beginning of 1990 and was subject to complete refurbishment between 2007 and 2011.
Overview Semi- center CBD ► Total GLA: ~ 44,700 m² Center ► Main Tenant: Marie Tecnimont Periphery
Major strengths of the asset
► Iconic building ► Strategic location in the Porta Nuova BD ► Recently refurbished
Strategy Occupancy Rent 100% 15.7 m ► Multitenant assets currently underrented: reversionary potential WALB 9.1 YEARS
CMD 2018 166 V. APPENDIX APPENDIX OFFICES DETAILS ON THE 1.8 BILLION PIPELINE TO BE COMMITTED
Rent increase Total cost Total cost Yield on Target rent Projects Location Type Surface vs previous rent 100% Group share cost Group share Group share Redevelopments M M % M M % Gobelins Paris Redevelopment 4,900 m² Paris Saint-Ouen Paris Redevelopment 30,000 m² Omega Levallois Redevelopment 20,000 m² Rue Jean Goujon Paris Redevelopment 8,500 m² Silex II (50% share) Lyon Redevelopment 30,900 m² Corso Ferrucci Turin Redevelopment 22,800 m² Via Dante Milan Redevelopment 4,800 m² Subtotal 121,900 m² ~ 900 million ~ 815 million ~5.5%1 ~ 35 million1 + 16 million1 +81% New constructions in Offices and Hotels Project I Greater Paris Acquisition 25,000 m² Cité Numérique Bordeaux Acquisition 19,200 m² Helios Lille Land Bank 9,000 m² Meudon Ducasse Greater Paris Land Bank 5,100 m² Montrouge Flow Greater Paris Land Bank 23,600 m² Montpellier Orange Montpellier Land Bank 16,500 m² d'Orly (50% share) Greater Paris Land Bank 22,600 m² Symbiosis School Milan Land Bank 9,400 m² The Sign Milan Land Bank 26,500 m² Principe Amedeo - Milan Milan Land Bank 7,000 m² Greater Paris Hotels (42% share) Acquisition 617 rooms & Lyon Subtotal 163,900 m² ~ 715 million ~ 635 million ~6.6% ~ 42 million + 42 million Mixed-use projects N2 (50% share) Paris Acquisition 15,900 m² Alexanderplatz (50% share) Berlin Land Bank 70,000 m² Subtotal 85,900 m² ~ 615 million ~ 305 million ~5.1% ~ 16 million + 16 million German Residential German Residential (61.7% share) Berlin Land Bank 38,000 m² ~ 110 million ~ 68 million ~5.5% ~ 3.7 million + 3.7 million Total ~410,000 m² ~ 2,340 million ~ 1,825 million ~5.9% ~ 96 million + 77 million
CMD 2018 1 Rental income and yield excluding Jean Goujon where Covivio plans to move its Paris offices 169 APPENDIX HOTELS 2016: ACQUISITION OF AN ICONIC OPERATING PROPERTIES PORTFOLIO IN GERMANY
~ 880 million mainly in Growth drivers Berlin1 Strong performance Revenue based on Net Average Daily Rate Per Room Operating Income still below comparable major +11% European cities >30% 9 hotels 4-5* | City center EBITDA EBITDA growth since locations Asset management leverage margin acq. 60% Berlin; 40% Dresden & Leipzig EBITDA growth through capex program Average Daily Rate per room: <90 in Berlin
Park Inn Berlin Pullman - Dresden Westin - Dresden Westin - Berlin
CMD 2018 1 Group share at H1 2018 171 2017: SUCCESSFUL ENTRY INTO SPAIN
Growth drivers Successful entry into Spain Strong performance
17 hotels 4-5* | City center Variable rent component locations thanks to RevPar1 growth >40% +7% 559 million acquisition price EBITDAR value creation Lease renegotiations 168,000 / room margin since acq. through rebranding 80% Barcelona & Madrid Average Daily Rate per Disposal of non-core hotels room: <100 in Barcelona & Madrid
AC Forum Barcelona Paseo Del Arte - Madrid NH Collection Colon - Madrid Eurostars Gran Marina - Barcelona
CMD 2018 1 Revenue Per Available Room 172 2018 ACQUISITION IN THE UK: START OF A LONG-TERM PARTNERSHIP WITH IHG (1/2)
1 14 hotels in lease in the major UK 976 million 4* and 5* hotels cities Prime locations in city-centers 2,638 rooms
Hotels locations by city
Edinburgh Blythswood Square - Glasgow George Street - Edinburgh
London
Principal hotel - Manchester Russell Square - London Development projects
CMD 2018 1 858 M£ with a conversion rate of 1.14 at 02/05/2018 173 2018 ACQUISITION IN THE UK: START OF A LONG-TERM PARTNERSHIP WITH IHG (2/2)
RevPar1 +5.6% in 2017 despite Brexit
th Dynamic The 4 most popular New partnership destination in Europe with a major hotel operator market Secured The 1st investment market 25-year triple net lease for hotels in Europe operations 5.0% yield on minimum guarantee fully indexed 6% target yield on a run rate basis through variable rent component >30% EBITDAR margin
Upside Asset management through capex & rebranding potential
Oxford street - Manchester
CMD 2018 1 Revenue Per Available Room 174 TOP 10 ASSETS RUSSELL SQUARE, LONDON
1 restaurant
4 bars
5* Hotel 9 meeting rooms
334 rooms
>20 min walk
CMD 2018 175 TOP 10 ASSETS PARK INN ALEXANDERPLATZ, BERLIN
2 restaurants
1 bar
4* Hotel 12 meeting rooms
1,012 rooms
CMD 2018 176 TOP 10 ASSETS THE WESTIN GRAND, BERLIN
2 restaurants
1 bar
5* Hotel 11 meeting rooms
400 rooms
CMD 2018 177 TOP 10 ASSETS CHARLOTTE SQUARE, EDINBURGH
1 restaurant
1 bar
5* Hotel 6 meeting rooms
199 rooms
>15 min walk
CMD 2018 178 TOP 10 ASSETS MERCURE TOUR EIFFEL, PARIS
1 restaurant
1 bar
4* Hotel 11 meeting rooms
405 rooms
CMD 2018 179 TOP 10 ASSETS EUROSTARS GRAND MARINA, BARCELONA
1 restaurant
1 bar
1 outdoor pool 5* Hotel 24 meeting rooms 291 rooms
CMD 2018 180 TOP 10 ASSETS GEORGE STREET, EDINBURGH
1 restaurant
1 bar
5* Hotel 8 meeting rooms
240 rooms
>15 min walk
CMD 2018 181 TOP 10 ASSETS AC FORUM, BARCELONA
1 restaurant
1 bar
1 outdoor pool
4* Hotel 18 meeting rooms
364 rooms
CMD 2018 182 TOP 10 ASSETS IBIS CAMBRONNE, PARIS
1 restaurant
1 bar
3* Hotel 6 meeting rooms
523 rooms
CMD 2018 183 TOP 10 ASSETS NOVOTEL GARE DE LYON, PARIS
1 restaurant
1 bar 4* Hotel 6 meeting rooms 253 rooms
CMD 2018 184 DIFFERENT TYPE OF OWNERSHIP AND MANAGEMENT
Brand Operations Operating Owner of the real management management result estate
Operator receives hotel results
Lease contract Operator / Manager Covivio
Covivio receives rents
Operator receives variable fees*
Management contract Operator / Manager Covivio
Covivio receives hotel results
CMD 2018 185 * Fees calculated on the EBITDA of the hotel CONTACT
Paul Arkwright Hugo Soussan Tel.: +33 1 58 97 51 85 Tel.: +33 1 58 97 51 54 Mobile: +33 6 77 33 93 58 Mobile: +33 6 84 44 95 40 [email protected] [email protected] Paris 30, avenue Kléber 75116 Paris Tel.: +33 1 58 97 50 00
www.covivio.eu