Welcome to the first quarter 2025 result.
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The management of the company will run you through the presentation that will be followed by a question-and-answer session. You can ask a question by phone by pressing star five on your telephone keypad. I would now like to introduce Mr. Pere Viñolas, CEO of Immobiliaria Colonial. Please, sir, go ahead.
Thank you. Good afternoon. This is Pere Viñolas speaking together with Carmina Ganyet, Chief Corporate Officer, and Carlos Krohmer, Chief Corporate Development Officer. It is a pleasure for us to share with you our results for the first quarter of this year. Before we get into the actual numbers that we would like to share with you, first, a comment on the framework for these numbers, a reference to our strategic positioning, which is the basis for Colonial to deliver earnings and value growth. As you may know, Colonial's strategy is based on prime asset class, which delivers strong rental growth. This is delivering pricing power, as we have been proving in recent years. This is attracting the best clients, which is the way to capture above-average rental growth. As a consequence of this, this is about strong earning growth.
That's why we've been able to deliver superior double-digit EPS growth in the last three years, 15% CAGR. This is why today we can announce that we are again showing this kind of earning growth, 16% the EPS of this year compared to the earnings of last year. The second angle is remembering that Colonial is also about a platform. It's also about a platform that allows for human adaptation to human transformation, adapt our buildings to the needs of the cities, adapt buildings to the needs of top clients. I always like to remember that everything Colonial owns, it's a super quality, but a vast majority of this has been the result of our transformation efforts. Almost 80% of what we own is being subject to Alpha intervention.
These two drivers, our prime positioning and our platform skills, are the, I think, the framework to explain our results that I show you and share with you immediately. On page five, the main KPIs about the results for the first quarter of this year. We have finished our first quarter with a gross rental income of EUR 97 million. That is a 4% growth like-for-like, 5% like-for-like if we talk about net rental income, which is now EUR 89 million for the first quarter. Release spread for the group, 11%. It is relevant to emphasize the case of Paris, 20% release spread, very strong. Maybe it is a good thing to highlight this in the current market environment. Rental growth, again, very strong, 7% rental growth measured as signed rents versus December 2024 ERV, maybe highlighting again the case of Madrid, 9% rental growth in the case of Madrid.
Finally, as I was saying, EPRA earnings jumping 16% to EUR 55 million. Having said that, if we go to the EPS reference, this is almost EUR 0.09. That is basically flat compared to last year, but basically on track with the guidance that we've been providing to the market. This is in line with our expectations in order to achieve this EPS that we expect by the end of the year. On page six, highlighting the performance for the different markets we are in, you can see here that it's quite robust across the board. Paris, 7% rental growth in three months with a net rental income like-for-like 4%. Madrid, rental growth of 9% with a net rental income growth like-for-like of 7%. Barcelona, rental growth 6% with a net rental income like-for-like of 2%. This slide, by the way, shows our locations and our occupancies.
As usual, the map speaks for itself. This is the introduction. I will come back at the end of the presentation with some additional comments. Now let's jump into the details. Next section is about financial performance. Carmina, when you wish. Thank you.
Thank you, Pere. I will go in more detail into the numbers. In page eight, you can see the gross rental income growing basically on the back of the core portfolio and the project delivers. 4% like-for-like core portfolio thanks to the yearly growth across the market in new lettings. In the case, as Pere mentioned, the outstanding release spread, especially in Paris. Additionally, EUR 4 million, 4%, thanks to the project that we have been delivering, especially Magnum, and the Criteria portfolio entering into our portfolio, into our operational since July 2024. Compared to the previous quarter from the quarter last year, this is a delta from this quarter in 2025.
This both positive impact has been offsetting the negative impact of EUR 5 million due to the fact of Condorcet going or entering into the project pipeline and a Haussmann that is going to be delivered during 2025, second half of 2025. If we go into the net rental income, next page, you can see here the details of the positive trend of the positive like-for-like growth across the markets, and especially in the net rental income, increasing efficiency. We work every day to increase efficiency in our portfolio across all our contracts. Basically, this active management in efficiency, you can see in numbers, 5% net rental income, and in the three markets where we are operating, all of them with a positive like-for-like growth in net rental income.
By concepts, in the right-hand side of the page, you can see the net rental income by concept, how it's growing, concept by concept. First, 2.4% due to the indexation. All our contracts are linked to the CPI or to the ILAT in France. It adds a positive 2.4% in the growth. Additional 2.3%, this is a demonstration of pricing power across the market and a slightly positive impact from occupancy, as you will see later on. In next page, in page 10, this strong operational performance gives us a strong recurring profit growth, 16%. As we explained before, EUR 4 million core portfolio, very positive rental growth in the new leases, very positive release spread, especially in Paris, and of course, inflation across the contracts. Additional EUR 2 million thanks to the Magnum and criteria portfolio entering in the income-producing assets.
On top, you can see here EUR 4 million in the overheads and other income. This means basically savings in overheads, some economics in overheads, and on top, CapEx reinvoicement to our tenants, especially when the contracts matures. We are able in some contracts to reinvoice and to get the CapEx back into these contracts. A very important impact, positive impact of EUR 5 million on financial cost. Basically, an important reduction compared to the previous quarter, EUR 500 million debt has been reduced. That means that additional income from cash remuneration and on top, additional active liability management in the capital structure. All these positive, important impacts have been overcompensated, the EUR 7 million less results or less income from Condorcet now in the project pipeline and Haussmann still in the project pipeline that will come into operation during this year at the second half of the year.
Basically, EPRA earnings increasing double digit, 16%. EPRA EPS remaining flat, but importantly, considering the new shares outstanding after the capital increase executed in last year. We are confident to maintain the guidance that has been on track thanks to these outstanding results. In the capital structure, in the next page, both investors and both the rating agency confirm the robust capital structure. We have shared with you in the previous communication the successfully green bond issuance of EUR 500 million. Recently, we have confirmed by S&P the BBB+ with a stable outlook rating, basically confirming the strong performance, the cash flow resilience, and the strong liquidity position and the limited interest rate volatility for the coming year. This mainly you could see in the following page, in page 12. The debt at the end of the quarter, it's EUR 4.4 billion.
When we compare this debt with the previous quarter, in the beginning of the first quarter of 2024, the debt has been reduced EUR 500 million. In the liquidity, we are, as you know, always in the safe position. We have EUR 3 million liquidity between cash and credit facilities, which covers more than one time, 1.3x the debt maturities for the following three years. Thanks, as you know, thanks to the pre-hedge that we have in place and all the debt being 100% hedge or pre-hedge, we can maintain this very interesting cost of debt, 1.77%. Our estimation for the forecast for the following years would remain in a very interesting level between 2%-2.5%. Carlos?
Let's step into the operational section. I will start on page 14. You see how the letting performance has been for the first quarter. We've signed more than 30,000 sq m, so a significant acceleration in letting activity on a year-on-year comparison, 61% more. These 32,000 are equally split in renewals, 17,000 sq m, and letting up of new available space, 15,000 sq m, and annualized rents of EUR 13 million. Interesting, particular case studies to look at the Paris market. In Paris, the rents we have signed is EUR 6.4 million in annual terms, and this corresponds to 6,400 sq m. So EUR 6.4 million divided by 6,400, we are signing an average rent of EUR 1,000 per sq m for the total portfolio of Paris. This is a clear reference, a clear view of the prime nature of our portfolio.
You see here examples of specific contracts that we have signed here on the right-hand side. What you can see, we are capturing really the top rent in the market, the highest rent, and we are really setting the benchmark, and we are delivering extremely strong rental growth. With this, I go to the next page. Here on the next page, you can see the rental growth. Just in three months, as an important element to take into account, the rents we have signed on all of these 32,000 sq m are 7% higher than the market rent, that the ERV of our appraisals as of December. Just in three months, 7% more. We want to put this into another comparison, another reference when we look throughout our contract portfolio, how all of the contracts with an indexation window have been updated in terms of indexation.
We have 3.4% applicable indexation in the first quarters of the year. Our high-quality product is delivering, as we always were stating, a significant premium in rental growth vis-à-vis the standard indexation. As you can see, 7% ERV growth, but a 3.4% indexation applicable to our portfolio. Close to 400 basis points of growth premium because of being in the prime end of the market with our assets. We are really benefiting from a further polarization trend in demand and from an office supply that is shrinking in all of the markets and strong underlying fundamentals. This also is reflected in release spread, double digit, 11%, driven in particular by Paris, one of the strongest markets in rental growth. All of these KPIs are well at the top of the sector. There are not so many companies that can show these levels of rental growth.
This also has to do with a very strong occupancy profile of our company, of our portfolio. We're at 95% as of today. What is important to take into account, this 95%, when we compare it with previous years, is that 2% of this is surfaces that have been delivered recently of top quality spaces that have to be let up. In comparable terms, in terms of like-for-like occupancy, we are remaining at levels of 2023, 97%. We have a structural vacancy of 3%. When we go into the details of this, you see that in the prime end, this is almost testimonial, 0.3% prime Paris, 0.7% prime Madrid and Barcelona. We have the remaining of the 3% as 1%, the 22@ in Barcelona, where we are now getting more momentum.
We are currently negotiating contracts that will bring down this 1%- 0.7%, and then the remaining 0.9% is a residual part of secondary spaces that we have that is really an absolutely tiny part of these types of locations that we have in our portfolio. Very strong occupancy year on year, again, in the first quarter. We go a little bit more into the operations of the upcoming new spaces and the different markets in the project that we delivered recently and that has the potential to give us an additional annual rental volume of EUR 20 million. We are today already at a level of above 20,000 sq m of contract signed or in a final phase to be signed shortly, so strongly committed.
We are signing these spaces with a 7% higher rent than our initial underwriting that is behind the 8% yield on cost of this project. As you know, we have then also the renovation program. Carmina mentioned it, Haussmann, San Agustin. It is going to be delivered towards the end of the year during the second half of the year. As of today, we have already signed 2,000 sq m with a top-notch rent above EUR 1,000 per sq m. Already EUR 2 million secured out of the total potential of this asset. Another element is interesting. The 22@ is gaining momentum in top assets. We have assets with high-quality features in very good micro-locations.
We have signed close to 8,000 sq m in Iacuna with a tech company, and we are about to sign a lot of sq m with a digital company that is already our tenant, but there was a rental renewal window. They are not just signing and signing at a higher price. They are moreover increasing the space by more than 20%. When there you can see the 22@, that is a market that still has to recover a little bit. The good product is already showing a strong momentum. We are really having an accelerating activity in all of our products.
Thank you. Let me start with the last section. The summary of what we have seen in the presentation is a good first quarter. In the end, good letting activity, good increase compared to last year, nice kind of news in Barcelona in particular, good occupancy, good rental growth, very strong rental growth, and a nice performance on the financial side, rating confirmed, very low cost of debt for the long term. Everything means in the end, very strong profile in terms of cash flow, in terms of cash flow growth. As I said at the beginning, I think this is based in the end on the strategic positioning of Colonial and its prime asset positioning in the fact that we are a platform for human transformation. In the end, we are sitting on several layers that allow for earning growth.
What we are today presenting is EUR 55 million of earnings. This in the end is showing a 15% CAGR for the last three years. This is looking backwards. Looking forward, I think that it's important to see what is lying ahead. In the end, today, Colonial is sitting on close to 200,000 sq m in human transformation initiatives with EUR 100 million of potential rental income, out of which 64 have to do with the new Alpha 10 pipeline. If we consider the potential that this means in terms of EPS, that means that in the midterm from 2025- 2028, we see the potential for an additional EPS of more than EUR 0.11. That is a 33% growth on 2024 EPS. All of these projects, by the way, go as expected.
This is the first obvious layer of additional EPS growth for the near future. On top of that, as you know, as a third layer in the field of urban transformation, in the field of additional value-added initiatives that we may consider, we have announced recently a EUR 200 million investment to create the European leading operator in science and innovation. Just a reminder of what we announced just a few days ago. We are the main investor in an existing portfolio of close to EUR 400 million with expectation of a stabilized yield on cost between 6% and 7%. This is most of all about an additional build-up strategy that would allow for a short-term pipeline with attractive value-added returns that would mean EUR 700 million of assets under management with a stabilized yield on cost of 7%-8% and a long-term ambition to accelerate this to third-party capital.
Here, Colonial trying to invest, number one, in the strategy of a slightly different asset class, number two, in an asset class with different kinds of returns, but number three, also putting at stake our value as a platform through our role of co-asset manager with the returns attached to this, and all three layers together meaning an expectation of geared IRR of around 15%. That's a kind of example of a third layer of drivers for future EPS earning growth, which started last year already with the Alpha X project. Maybe a comment here, again, as we did when we were presenting this initiative. This initiative is not to revisit the strategy of Colonial. Is it about confirming our strategic view of Colonial, which is Colonial is expected to be a company with a core pricing power element at the heart of its strategy?
As I said in previous meetings, we believe a lot in the potential of our basic positioning. This is proven in recent years and more to come, as we have shown. We also believe in the value-add component through human transformation of our platform. Traditionally, we've devoted around 10% of our assets under management to this. These initiatives of Deep Labs fall within this category. Therefore, there is no lack of consistency. It's the other way around. It's super consistent, this last investment with our long-term view of Colonial. All in all, page 23, a vision of our company with a very strong EPS growth profile with double-digit IRRs expected for the next few years, as we have seen existing human transformation projects on the way with an expected impact of 11 cents midterm.
Now adding this additional layer of science and innovation platform with third-party capital that could be adding EUR 0.02-EUR 0.03 of EPS in the midterm. Not to forget the prime asset reversion, superior cash flow growth that could have a GRI impact of EUR 47 million, and obviously with the additional potential that may fall from opportunistic capital recycling in addition to all of these layers. In the end, what we shared today with you is a good set of results for the first quarter. The EPRA earnings growth, 16% year-on-year growth. Our EPRA EPS full-year guidance on track. Good fundamentals in terms of net rental income, 5% like-for-like growth. Good fundamentals in terms of rental growth, more than pricing power, and further growth secured through project deliveries. That has been the reality of this quarter.
I just highlighted with a strong growth profile for coming years, more than EUR 150 million of future rents through the new pipeline and reversions, the enhanced human transformation growth strategy through the science and innovation and third-party capital component, and the opportunistic capital location that should benefit from European real estate cycle recovery. All in all, good EPS CAGR expected for the next years. Confirmation of our guidance for 2025, which remains in the range of 32-35. Let's not forget about the dividend of EUR 0.30 per share with an 11% year-on-year growth to be delivered shortly. This has been the presentation of our results. Thank you very much for your attention. As usual, we will gladly answer any questions you may have. Thank you.
Ladies and gentlemen, the Q&A session starts now. If you wish to ask a question, please press star five on your telephone keypad. Thank you. The first question comes from Jonathan Kownator from Goldman Sachs. Please go ahead.
Good evening. Thank you for taking my questions. I have a few, if I may. First, on slide 10, on your earnings bridge, you have a positive impact both on SG&A and financial costs and others. Two questions there. First of all, I think, Carmina, you mentioned some CapEx expense to tenants. I assume these are this break, lease break incentives, or how much was that? Is it an indemnity for departure, and how much was the amount? Also, there was a positive tax contribution instead of negative. I was just wondering what that was. That is the first question, please.
Yeah. Thank you, Jonathan, for the question. On the CapEx reimbursement, mainly when a tenant is leaving, and under the agreement we have in our contracts, all the floor plans need to be delivered with the same condition as they were when they signed the contract. This means in this case, I think it is EUR 3 million, basically, coming from especially Condorcet, which is La Défense when they deliver the space and the building. Before we start the project and all the analysis on the project, it is a negotiation about the CapEx reimbursement and the commitment from the side to reimburse this CapEx to the company, to the vendor. This is a normal practice in our business. In this case, especially because of the size of the building, it is more material. On the income, you mean in the tax stories?
Yeah, the line tax and others, and I think the contribution is plus EUR 2 million in your P&L.
Yes. This is a reversion of a provision of the income that was estimated in 2024 that has been a different amount after being checked by the tax administration. This is the impact you have in the P&L in 2025.
Okay. So provision reversion on taxes.
The timing. Correct. It's not ordinary. Yes.
Yeah, yeah, yeah. Second question, just wanted to come back on your new investment in science and innovation. Two questions here. First of all, you're obviously investing EUR 200 million for 0.4 million of assets. Just wanted to understand if that's going to flow as a consolidated investment into your P&L, or if that's going to be separate, given also that the LTV is higher than your existing portfolio. Second, I just wanted to understand, you talk about stabilized yield of 7%-8%, I think, which is quite attractive, obviously. Just wanted to understand what's the current yield when you buy the assets and what's the path to get to that stabilized yield, please.
Okay. Jonathan, in the first question, this is a vehicle with Third Capital, or Third Capital, sorry. The way that has been structured and will be structured will be accounted in our books into equity methods. This is we are going to be diluted with the Third Capital money. This is a co-GP, a co-control. This means in accounting perspective, you need to consider it as an equity method. The debt is not consolidated in our books, but it will be impacted through equity methods. Every year, you will see the impact on the revaluation of the NTA in this investment in our balance sheet. The yield on cost, yes, when it is stabilized, you need to forecast the stabilized yields in its EUR 400 million assets in the science and innovation today, not in the pipeline, but the SIP portfolio today, it is EUR 400 million.
The stabilized yield, because of some repositioning assets, some release spread that we had in place, you need to consider 6%-7% yield on cost on EUR 400 million. This is the estimation. This is the forecast and our estimation and the numbers that we are seeing in one year and a half.
That's going to come in one, one and a half years. Okay. Very clear. What's the current yield? Is there a yield currently, or do you have to, I don't know, I mean, what's the precise situation? Are the buildings empty and you need to do CapEx, and then you're going to relit them? Is that what we need to understand?
No. Yeah. Today, it's more than 80% occupancy rate, but there are some spaces that they split that are 20%, 20-something percent of the total surface are lots attached to the corporates that are inside as a tenant inside of this portfolio. Mainly, there are some additional minor CapEx, EUR 20 million, which has been reduced to the price to complete this space and to release the rents attached to this space.
Okay. So the in-place yield would be what, 5%, 6%, 5% maybe, or is it lower than that?
Sorry, today?
Yes.
Yeah. Yeah. In line of 5%.
Okay. Thank you.
Thank you.
The next question comes from Florent Lar oche from ODDO BHF. Please, sir, go ahead.
Yes. Good evening. Thank you for the presentation. I would have maybe three questions. My first question would be on the 2% of vacancies that comes from a project that has been delivered recently. Would it be possible to have more color on how much time you need maybe to let these buildings? I do not know if you have any current discussions on the other side. Do we need to take into account any departure in the short term? This is my first question. My second question, coming back to the rental growth in Madrid of plus 9%, but we see that we have a flat revision. Would it be possible maybe to have an update on your revision potential in Madrid and Barcelona? My third question would be on the appetite in the investment market today in Paris and Spain.
What do you think about that? Since maybe the events with the U.S. tariffs, maybe any colors at this stage on the valuation of the asset for at midyear? That would be very useful. Thank you.
Yes. Sorry. On the first question, exactly which asset you were referring to about the vacancy?
The asset that you delivered recently. You have Magnum?
Okay, okay, okay. Maybe Carlos, can you cover maybe these questions?
Yeah. On the current delivered projects, as I explained, we are progressing quite strongly on Mendez Álvaro. On the other assets, especially Diagonal 197, we are seeing a lot of market interest. As you know, we are prudent in guiding. Until we have something more strong or more closer to a signing, we are not really giving specific guidance on it. What I can tell you, and I think I explained it with the other examples of the 22@ with the technology building, Pare Glorias building, that we are seeing a pickup in momentum in the 22@, especially for top-notch buildings. Diagonal 197 is in the best micro-location of the 22@. It is a renovation program. This has been fully repositioned just recently. We are positive on it. We are going to have there a good performance. We are working on it.
Today, we have a lot of interest, but not something that we could give a specific guidance. We will come soon with very good news. On the release spread and the ERV growth, maybe technical thing, you cannot fully compare the two figures in terms of that it's not totally the same universe. The ERV applies to all of the contracts signed to 32,000 sq m. The release spread, you can only apply to the things where there is a tenant, where the market rental review, so to the renewals. As you have seen, the renewals is approximately half of it. It depends a little bit on the mix. In this first quarter, close to 90% of the renewals corresponds to an asset in the 22@ that at the moment is still a market that needs a little bit stronger momentum.
Another one corresponds to an asset in Campo de las Naciones. We are not talking about an asset in the pure Castellana. This is why in locations that are not as similarly strong as the Castellana, we have had a flat release spread. When you look at the broader picture and the total 32,000 sq m and the prices of everything, we have had, especially on the new lettings, a lot of assets that are really in the pure CBD. Therefore, you see this strong rental growth. To give a conclusion going forward, Spain, as you know, picked up in the past very quickly indexation. From a general point of view, the markets are more or less at the ERV level.
Going forward for the prime, we should see progressively ERV spreads that are similar to a release spread that are similar to the ERV. In France, contracts are more longer terms. You are coming when you are doing a renewal from moments later in the past. For this reason, there is a higher release spread. The market is today the strongest market in Europe in terms of rental performance. This also explains basically. You see it also in the ERV growth.
We have another question, and it comes from Alex Kolsteren from Van Lanschot Kempen. Please, sir, go ahead.
Hi. Good evening, Pere. Thank you for the presentation. Two questions at this point from my side. One, we've discussed the sort of letting numbers. I was wondering if in this leasing, the incentives have moved, so have they remained stable or gone up or down? Secondly, after the reporting period, so April more or less, obviously the tariff escalation, do you see a slowdown in tenant decisions already?
Yeah. On the release spreads, as you may know, in Spain, especially in the CBD, plays a minor role. So it's irrelevant. They remain tight and stable. In Paris, our product has the lowest level of incentives. Typically, in the CBD, you can see levels of incentives between 14%-16%. We are at levels of 12%. Extremely low levels. We are beating the market in terms of rental performance on every floor of the rental price revenue stage. On the top line, that is the ERV, and on the incentives, that is below the ERV. In terms of momentum in general, for our product, we are seeing strong momentum. Why? Because it's scarce. When you look at how much is the availability of grade A product in the three cities where we are, it's below 1%.
There is no supply, and there is strong demand for this product. We are seeing strong activity. I think it's also that the numbers speak for themselves. 60% year-on-year growth in letting activity, I think it's really pretty outstanding and not at all signaling for our product. I'm talking about our top-notch product. Any hesitant on decisions is the other way around.
All right. Thank you very much.
It seems that there are no further questions. Now we'll hand the floor to the CEO of Colonial, Mr. Pere Viñolas, to close the meeting.
Thank you. Just to finalize, we have been very pleased to share these results with you. It is a part of a long-term trend. It is now a few years that we are showing this very strong performance in the fundamentals. It is also good to see this across the board in our different geographies. We remain confident about our expectations for year-end. It will be a pleasure to confirm that in the next future meetings. Thank you and have a good day. Thank you.