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Edited Transcript of GFC.PA earnings conference call or presentation 20-Feb-20 9:00am GMT

Full Year 2019 Gecina SA Earnings Call

Paris Mar 6, 2020 (Thomson StreetEvents) -- Edited Transcript of Gecina SA earnings conference call or presentation Thursday, February 20, 2020 at 9:00:00am GMT

TEXT version of Transcript


Corporate Participants


* Mahkâmeh Brunel

Gecina SA - CEO & Director

* Nicolas Dutreuil

Gecina SA - Deputy CEO of Finance


Conference Call Participants


* Bruno Duclos

Invest Securities, Research Division - Financial Analyst of Real Estate

* Celine Huynh

Barclays Bank PLC, Research Division - Research Analyst

* Florent Laroche-Joubert

ODDO BHF Corporate & Markets, Research Division - Analyst

* Jaap Kuin

Kempen & Co. N.V., Research Division - Deputy Head of Real Estate

* Marie Amelie Charlotte Dormeuil

Green Street Advisors, LLC, Research Division - Senior Associate

* Pierre-Emmanuel Clouard

Kepler Cheuvreux, Research Division - Equity Research Analyst




Operator [1]


Good day, and welcome to Gecina Full Year 2019 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Méka Brunel. Please go ahead, ma'am.


Mahkâmeh Brunel, Gecina SA - CEO & Director [2]


Everybody here? Nobody is waiting outside? (foreign language) Good morning, ladies and gentlemen. On behalf of the Executive Committee of Gecina, I'm very pleased to present you our solid results for year-end 2019. And before starting our deck, we would like to show you a quick movie of the achievements of 2019. (foreign language)

Okay. It's always an issue with the techniques and technology. (foreign language) Okay, so next time. You can find it on the website and all the social medias. Okay, let's go to the deck. We are now working to build the future. It doesn't work either. Okay, who's in charge of technology in Gecina?

Okay. Just a reminder of our strategic review. What you observed for the last 6 years since the change of the shareholders of the company and moving from dividend-yielding company to a total return is the progressive transformation of Gecina.

Before the end of 2014, we were rent collectors and dividend-yielding company. Starting January 2015, we added the total return approach, which means that we are capitalizing on opportunities for accretive investment, extracting value through an ambitious pipeline in core areas and capturing value from dispositions and increasing Gecina's exposure to the most central areas, implementing sustainable innovation.

And today, we added another brick, which is servicing clients and users. We still collect rent, and this is very important. We continue to have our total return approach, and we are now servicing our clients and end users.

2017 and '18, we redefined our CSR priorities, integrating the whole 4 pillars into Gecina's strategy to support financial, environmental and social benefits.

'18-'19, we worked hard on our residential portfolio, which is back at the heart of our group's strategy. And in '18-'19, we also launched YouFirst, our umbrella brand, a client-centric approach to build the future through a B2B2C model, managing on our portfolio as a network of assets. This transformation is supported by renewed teams, by digitalization, proactive innovation policy and modernization of working processes.

We have now proven value-creation performance and are harnessing value creation through portfolio rotation and development pipeline. There are 2 bricks in the slide in front of you. Ambitious portfolio rotation for the last 6 years, EUR 8.2 billion of acquisitions, including Eurosic for EUR 6 billion in 2017, EUR 5.5 billion of disposition. Altogether, during the last 6 years, we have created EUR 600 million of net value, representing EUR 7.6 per share.

At the same time, we have also achieved strong results from the pipeline, 27 assets delivered EUR 2.8 billion total investment cost, EUR 1.3 billion of CapEx invested, representing EUR 1 billion of net value creation from the pipeline since end of 2014, which represents EUR 13.3 per share. Altogether, more than EUR 20 per share has been created during this period.

And the consequence is a further rationalizing -- or rationalization of our portfolio through disposition and acquisition, harnessing the value creation through centrality and scarcity. This portfolio is, today, unreplicable in Paris and Paris Region, in the most central areas around the hub of public transportations and mixed-use areas.

Our office portfolio represent EUR 16.5 billion, 83% of the total amount of -- total value of the portfolio, 63% based in Paris and 92.5% including Western Crescent and La Défense. Our multi-res portfolio, EUR 3.4 billion, including student housing, 17% of Gecina's portfolio, 71% in Paris City, 97% in Paris Region, the remaining is the student housing in different regional cities.

2019 it's a -- okay -- it's further steps towards transformation and performance, delivering performance on leasing, dispositions and transformation. You can see what we have done on thriving operating businesses.

Office -- on the office segment, 165,000 square meters has been let, relet or renewed in 2019, of course supported by the quality and the strength of the market, but also the quality of our new organization and transformation we have operated within Gecina. We're going to talk about that later on. Headline rental uplift achieved plus 16% in Paris CBD, 5, 6, 7 districts of Paris, and residential segment observed 7.4% rental uplift achieved through tenant rotation.

We also created value through a proactive portfolio rotation. Disposition of EUR 1.2 billion of nonstrategic or mature assets in 2019, plus 12% premium observed versus their appraisal a year before, enhancing centrality. And we also operated 2 asset swaps, selling mature assets while securing attractive, value-creating investment opportunities, the biggest being Carreau de Neuilly and a smaller one with 162 Faubourg Saint-Honoré.

And also, we delivered assets meeting our clients' needs. Fifteen deliveries in '18-'19, 14 office deliveries representing 242,000-ish square meters, EUR 2.1 billion total investment cost, 88% average occupancy rate so far. Rose de Cherbourg student housing for 7,500 square meters in La Défense. Today, we have EUR 2.9 billion of pipeline committed or to be committed, average yield on cost being 5.6%.

If you consider the centrality of our portfolio, you see that we cannot achieve those kind of numbers if we were to buy those kind of redevelopments. So it shows you the potential value creation we already have. And 6 new committed projects at the end of '19, more than 10 to be delivered in 2021.

2019 adds one more floor to the resi rocket. Subsidiarization is launched of our residential portfolio through 4 different items. We would be capable to capture potential value-creation investment opportunities in the residential segment if they meet our investment requirements, which are very solid and not going to change.

We would keep the group's capital allocation roughly unchanged, 80% to 20%, whereas we can also open the equity to potential third-party investors only interested by multi-res. This will enable us to reach a critical mass. Size matters for residential property, driving growth to maximize operational and financial performance. And eventually, entering other markets in France when they meet Gecina's criterias, if opportunity arise, especially in different regional metropolitans that we can also consider.

It has also been further steps toward transformation and performance through the launch of YouFirst client-centric approach, the new brand launched by Gecina. YouFirst is driven -- this brand is driven to meet the demand of our clients by innovation. We would like to make their lives easier. We would like to be -- to have a proactive, digitalized and innovative client-centric approach and to build desirable and sustainable cities for users. Innovation would improve operational efficiency and develop new value-added services for clients.

Operational efficiency, for instance, through the creation of a new CRM for both multi-res and offices; digital signature for leases, not only for leases, for all kind of contracts, is going to spread over; in-house open innovation platform launched already; digital portal to enhance brokers' efficiency for leasing with a seamless end-to-end digital process.

And also, we are creating a digital app to distribute services provided by Gecina. This is going to come expected -- this is expected in 2020. Partnership with GarantMe to facilitate access to housing for students and also to garant us to get paid. Shared library in several residences, charging points for electric cars, et cetera. Stake acquired in Fifth Wall, EUR 20 million committed, and Demeter funds to also learn at large scale what [protect] means. Partnerships with incubators for innovative start-ups, WILCO, Paris&Co, improving our knowledge and our conviction for the future of our cities.

Altogether, operational and financial performance to be combined with social and environmental benefits to a new label we are launching, which is UtilesEnsemble. Gecina's core purpose is work in progress. It's an inclusive way to work. And we are now after working with our Board -- the Executive Committee and the Board working on that item. Now we are spreading to the whole management team and then to 100% of our colleagues before integrating another set of stakeholders.

This commitment goes through 3 main items. Environmental commitments, we know our 4 pillars: wellbeing, biodiversity, circular economy and carbon neutral. Minus -- almost minus 36% of carbon emissions since 2008. We are aiming carbon neutral by 2050, which is a Paris Agreement target; responsible loans of EUR 910 million; carbon disclosure, A-list.

We are very honored for the first time, and thanks to the huge amount of work done by all the teams of Gecina to join the A-List of Carbon Disclosure Project, CDP. Internal carbon funds, which, by the way, is the carbon taxation. It's a way to tax our cash flows and to consider that if we convert that into investments which are going to reduce our carbon impact, then we'll have a better rating.

And we are working on how to inject a little bit of compensation to create more knowledge of our colleagues in terms of what carbon neutral means and how we're going to compensate that. By the way, we have stopped to do offsetting of carbon, except for our flights during the road shows. This is the only way we do offsetting, otherwise, this is the end of offsetting.

Commitment for people. Gender equality, this is part of the DNA of Gecina, 92/100 score with the French Ministry of Labor. Promoting the employment of disabled people, diversity commitments, micro-donations made possible for employees. Quality of life in the city, emergency housing spaces for disadvantaged communities in Paris.

We are sponsoring Fondation du Patrimoine for a fundraising campaign named Plus jamais ça! in order to securitize the buildings of our -- full patrimonial buildings that are endangered. One building, one artwork and dedicated innovation and CSR think tank, which has been expanded to Castellum last year.

Altogether, we believe that financial and operational performance should include environmental commitment, quality of life in the city, commitment for people around the main label of UtilesEnsemble. And we believe that altogether, this is a holistic way to have a virtual -- to have a virtuous way -- circle of doing things.

Now let's talk about business. Gecina's CSR road map, sustainability pays. Why it makes sense? Sustainability also drives operational value and financial performance. We definitely believe in that. Clients want sustainability -- sustainable buildings. Investors value companies that outperform on ESG.

We have WELL-certified our buildings to deliver productivity and cost savings, and we have done that for many, many years because this gives us the capacity to do energy cost savings, to create wellbeing, health, accessibility, comfort, connectivity and providing pricing power to landlords and therefore property value, which will be created through high sustainable requirements, which can slow down obsolescence.

And also, investors value companies that outperform ESG. Sustainable performance to drive inflows on equity and fixed income markets. Large asset managers starting to apply CSR criteria to 100% of their assets under management. Increasing appetite for securities issued by sustainable corporations to support stock price performance and favor bond issues with lower yields.

ESG performance potentially driving down the cost of debt. The EUR 910 million of credit lines with margins based both on financial metrics and ESG KPIs. It had -- are leading us to reduce our cost of debt. I would like to thank and congratulate the 5 banks who are our partners in these loans: ING, Crédit Agricole, BNP, Societe Generale and Natixis.

So what we are doing based on our 4 pillars with ambitious targets. You see that we are working hard on carbon emission. Minus 60% is our target by 2030, carbon neutral by 2050, already minus 36% since we have started to work on that, 2008. 95 office buildings equipped with a real-time energy management platform, 9 projects supported by our internal carbon fund.

We also promote up-cycling and recycling for circular economy. 95 -- 91% of our construction waste for projects delivered in 2019 has been recycled. 416 tons of carbon avoided by up-cycling, 83 tons of materials. Global agreement to systematically up-cycle carpets, for instance.

We also develop buildings and service for clients' wellbeing, develop buildings that promote wellbeing. 65% of our office buildings contribute more to the wellbeing and productivity of their occupants than a standard building. 106,000 square meters have WELL Certification since 2017.

And we increased our contribution to biodiversity. Greener plots and roofs to contribute to biodiversity, 37% of vegetated spaces at in-ground equivalent. 92,000 square meters with BiodiverCity label, and 100% of our building with green spaces with a biodiversity ID card. 72% of our square meters of office space in use are certified either HQE or BREEAM In-Use, up from 58% last year, thanks to 17 new buildings certified.

The average sector reduction last year was minus -- almost minus 2%. We are at minus 3.2% year-on-year. Energy consumption, minus 2% on sector; the market, minus 3.8%, almost a double for Gecina. And I won't comment again, the in-use specification. And of course, you see all the rating we obtained through different labels, but this is the result of what we are doing and not a target by itself. It's the way it's made.

So strong operational performance with supportive markets. Just a few words about the markets. 2019 has been a very strong year within the Paris office takeup. 2.3 million of square meters have been let, relet, 3.4% above the 20-year average. So it's quite outstanding. 39% of this takeup took place in Paris. And the immediate supply has decreased very sharply, minus 8% in Paris Region, only 14% available in Paris City itself.

Vacancy rates down, historically low, a couple of times it's happened, but not that often. We were at 5.3% by the end of 2018, now down by 4.9% by the end of 2019. We -- usually, we consider that 5% vacancy rate is a turning point in terms of vacancy rate. And below, there's a real lack of product, lack of supply in the market.

Paris itself is 2.2% versus 2.3% last year. There is scarcity, which leads the market, of course. And market rents are up in Paris City. Paris itself, plus 11%; Paris as a whole, (inaudible); Western Crescent, plus 3%; La Défense, Inner Rim, Outer Rim, quite stable. Scarcity in Paris City, of course, is driving the outperformance of market rent recovery.

Now this is supporting the markets feeding Gecina's reversionary potential. From 8.6% end of June, so we are now to almost 10% by the end of the year. Still based on ERVs as of mid-2019, disposition of assets in secondary areas with weak or negative reversionary potential helped to achieve that, and reversionary partly captured through 2019 transactions. We are expecting 3% like-for-like office rental growth in 2020, feeling very confident about that.

What we observed is in the Paris market, plus 23% in the CBD. This is not our portfolio, but this is the market. 23% of Gecina's assets are located in Paris CBD and 5, 6, 7. Excluding these areas, plus 10%. The market -- the uplift, 19% of the portfolio is in this area. Western Crescent and La Défense represent -- are flat, represent 30% of our portfolio. Were negative last year as far as I remember. Other Paris Region, minus 9%, 5%; and other, plus 2%, 3%.

Now the numbers in our portfolio after achieving 165,400 square meters let, relet or renewed in 2019, almost 7% of Paris Region takeup, we observed plus 16% in our portfolio, Paris CBD, 5, 6, 7; plus 9% in Paris City and other; La Défense is flat; minus 6% in other Paris Region within our portfolio, but it does represent only 5% of our portfolio; and plus 7% in others, again, 3%, not significant.

I'm not going to comment all the numbers, but the dynamic rental activity and early 2020 leasing keep us very confident for the coming year. We have more than 2 -- we have leased more than 200,000 square meters, including the leasing of early this year. Since January 2019, with -- since the beginning of the year, 44,000 square meters which have been leased or pre-let, including BCG pre-leasing on L1ve in Paris.

By the way, L1ve is in the list of the awards of MIPIM. Please, if you are attending the MIPIM, do not forget to vote for L1ve. Thank you very much. So 165,000 square meters represent circa EUR 64 million of annualized rents.

Focus on the last transaction, which has been done by Valérie Britay and her team. We have signed -- you're probably the first people. This is not to be -- it's just a milestone, but it's good to have those kind of milestones. You see that Paris has reached EUR 900 a square meter. Over 1,000 square meters in Avenue Matignon, 9/15 Matignon, which is quite iconic building.

But anyway, we have reached those numbers on 2 leases and with a very small amount of incentive. So -- and we saw that there are other reversionaries to be captured in these areas. Reversionary potential to be progressively captured through tenant rotation. You see what has been already done during these last years. This is due also to our very disciplined and asset management -- strong asset management capacity within the organization.

Now let's go to our proactive portfolio rotation. You know that we continue, and this is the consequence of the total return strategy, to rationalize our portfolio to do the capital rotation, reinforce our balance sheet all the time.

Just to show you the trend of historically high-risk premium appeals to investors compared to 10-years bond, French 10-years government bonds, you see that if you take the 2.85%, which is the prime yield in Paris compared to bonds being around 0, we had almost 300 basis points of positive difference. And if you compare to the average in Paris yield of our portfolio, office portfolio, 3.94%, you see that we have circa 400 bps of capacity, of positive capacity. So this is really leading our belief in the capacity to continue to invest in our portfolio and centralize.

Office investment, in terms of investment in Paris, has reached a high-ever amount of EUR 27 billion, plus 14% year-on-year. 44% of the investors were non-domestic. And this is really historically high. And 2020 is, according to brokers, is likely to follow the same trend.

Okay. So if you look at our EUR 1.2 billion of disposition achieved or secured, the breakdown is 1.2 -- of the EUR 1.2 billion, for what has been 100% achieved, EUR 893 million achieved by the end of the year, the remaining is under preliminary agreements.

But if you look at the breakdown of what has been achieved, EUR 558 million are offices, mature assets; EUR 274 million, nonstrategic. Remember, we still had last year hotels, boutiques, restaurants, whatever, logistics. So we've cleaned up the portfolio as much as we could. And EUR 61 million, the unit-by-unit sale of the, among other things, of the Hopper -- yes, Hopper projects --- [still exists]. Dispositions are largely executed outside of Paris and 33% really nonstrategic.

Accretive drivers, 12% over premium versus appraisal by the end of '18. This is very important because the market being very hot, we are capturing the value on nonstrategic areas and one-off assets we can own here and there to, again, continue to rationalize and concentrate. 63% of our office portfolio now are based in Paris itself versus 60% by the end of 2018.

Emblematic asset swap. I'm not going to comment that a lot. You guys have seen our press release during the course of the year. But of course, the most important one is the one of Carreau de Neuilly, which is a real potential of redevelopment, especially with the repositioning of Avenue Charles de Gaulle, completing the repositioning of Champs Elysées and Grande Armée. So this is going to be a real urban regeneration around that. So -- and we acquired EUR 306 million of Carreau de Neuilly. That is circa EUR 9,000 per square meter, we consider that we're going to have a marginal yield on costs above 6%.

We sold, for EUR 238 million, the swap of assets at an average valuation of EUR 11,500 per square meter at an average yield below 3%. So we'll see through these examples how does that drive our know-how, our capacity to structure asset swaps and sophisticated acquisitions, and the numerous opportunities within our Gecina portfolio to find mature assets that can meet vendors' criteria, if needed.

Emblematic pipeline to feed mid- to long-term growth and value creation. You know most of the assets which has been delivered in 2018. I'm not going to comment them. 173,500 square meters for a total investment cost of EUR 1.4 billion and still 6 more in 2019, representing 76,000, a little bit more than 76,000 square meters for a total investment cost of EUR 776 million. The occupancy rate is 88%. EUR 779 million net value creation booked to date since inception, for EUR 751 million of CapEx. It's circa EUR 1 for EUR 1 invested.

Pipeline will continue to feed our NAV. 6 new projects are added to the committed pipeline. You know that we have already Madrid. Being delivered this year, being La Défense; 157 Charles de Gaulle in H1 2021; L1ve in 2022. Those are the projects you know about.

We're going to have new projects in the market. Anthos in Boulogne, SunSide in La Défense, BioPark in Paris [certain] district between 2020, '21; Bancelles, 2023; Porte Sud, Inner Rim is 2023 also; 9 deliveries in 20 -- between '20 and 2023. Total investment cost of EUR 1.6 billion, 93,500 square meters to be committed. Average yield on cost is 5.6%, and theoretical prime exit yield of 3 -- versus theoretical prime exit yield of 3.1%.

Five deliveries in 2022; on the multi-res sector, 2, representing almost 20,000 square meters to be committed. Average yield on cost, 5.2%, very similar to what we have on the offices. And theoretical prime exit yield of 3.7%. Residential densification represents 1,700 square meters.

So the pipeline is refueled after massive deliveries in 2018 and '19. Committed pipeline, end of '18, EUR 1.7 billion. We delivered 6 assets. We committed 6 new projects. At the end of '19, we have EUR 1.7 billion committed. To be committed in the short-term period, we have another EUR 1.2 billion, 61% located in Paris. Average yield on cost, 5.6%; 3.2%, average theoretical prime yield, the total representing EUR 2.9 billion.

The deliveries have created almost EUR 780 million of net value since inception. EUR 318 million in '19, and the EUR 2.9 billion can be split and break down the way you see it here. This altogether will represent EUR 130 million to 140 million additional IFRS net rental income by 2025.

Now one more floor to resi rocket. Demographic and macro elements shows that demographic growth in France is going to be quite outstanding between -- for the next 10 years. You can see, from dark green to lighter green, the densification in different areas and the way this forecast move in this period.

Now we are expecting 9 million -- actually, the statisticians are expecting 9 million inhabitants more in France by 2060 versus a diminution of 15 million in Germany. Paris Region by '50 will have 6% more inhabitants, plus 30% of households, 1 million inhabitants more in Paris Region by 2050. 50% of them will live in the Inner Rim according to the statistics and 13% more students by 2026 versus 10 years before.

Residential investments will benefit from long-term demographic support in the most central areas, especially when you consider that we already are lacking good products and enough products to supply the needs of the population. And if it is only the half of these numbers, this is a huge and tremendous potential growth in the coming period.

Now our strategy is starting to bear fruit. This strategy has been ruled out gradually -- rolled out gradually since 2017. Total residential portfolio represents EUR 3.1 billion. The split is EUR 2.7 billion operating portfolio; and EUR 0.3 billion, the sale portfolio, which is the remaining part of Hopper and other buildings which were under unit-by-unit sales.

By densifying, extending and new development, we have planned for the coming next 10 years, EUR 300 million of CapEx plan. To renovate and upgrade, another EUR 200 million. We are going to optimize asset and portfolio management, and I would like to congratulate and thank Franck Lirzin and the whole team to have done this very profound work on the asset management on this portfolio, which was put aside for many, many years.

Disposition program on tenant departure on the remaining units for sale, of course, we consider that the capital gains which is going to be captured has represented 23% premium in 2019. So by doing this, we consider that we are continuing to create capital value through the development. Circa 65,000 square meters are already committed in our pipeline or to be committed or under review.

We are capturing rental uplift, plus 7.4% in 2019, even under rent control. Reversionary potential globally represents more than 10%. We can enhance rental margin, reduce vacancy, potential EBITDA margin improvement and progressive benefits coming over next years.

Now a couple of examples. We already talked about that, but it's going to be delivered little by little, densification and extension to capture capital value and cash flow growth. Five projects are ongoing, 25,000 square meters. Committed -- this is our committed pipeline. Four other further projects identified for almost 20,000 square meters to be launched in '20 and '21. And more projects under review, representing 23,000 square meters, controlled and likely pipeline.

High return on investments achieved and expected as most of these being built on sites that we already own, in areas where this could represent more than 50% of the construction costs if starting from scratch. So we have a couple of examples of densification and improving the quality of the environment by greening the whole global areas.

So we can say today that through what we have done during these last few years, we have a proven track record with tangible contribution by renewed strategy. Residential portfolio is accretive to Gecina, asset value return, and this is an evidence of a successful renewed strategy. Like-for-like valuation of this by 5.2%; uplift materializing new leasing by 7.4%; like-for-like rental growth, 2.3%; 20,000 square meters of committed projects; 20,000 to be committed; and 97.6% occupancy rate ratio in 2019.

Now I will turn over to you, Nicolas, to talk to us about our financial results. Thank you.


Nicolas Dutreuil, Gecina SA - Deputy CEO of Finance [3]


Yes. Thank you, Méka. Good morning, everyone. Let's look at now the translation of the implementation of our strategy and of our 2019 achievements in our numbers.

First, I would like to say that, once again, thanks to our strategy focused on centrality, focused on our development pipeline, we have outperformed our real estate benchmark, which is immensely high [of this index.] Indeed, as you can see on Page 36, we have delivered, over the last 6 years, a return of 9% compared to 3% for the index. And if we focus on 2019, our total return has been 12.2%, meaning that we have delivered for shareholders EUR 19.7 per share of value.

This EUR 19.7 per share being the combination, as you can see on Page 37, of the EUR 5.5 per share of dividend that we have paid during the year and of the increase of our NAV of EUR 14.2 per share. If you look at how we have delivered this 12.2% return, what's very interesting is that all the engines of our total return strategy have contributed to this performance.

Of course, the first one being the operation. You can see here the results of all the achievements in terms of leasing, in terms of crystallization of reversionary potential, in terms of management of the vacancy, in terms of negotiation of our financing structure. That has been resulting in our FFO per share, which is at EUR 5.95, resulting in a 3.8% yield -- 3.7% yield, sorry.

What's also very interesting is that when you look at the 2 other engines of total return strategy, which are rotation and development pipeline, when you combine the performance of these 2 engines, in fact, you double the performance we have on the operation. Meaning that this is a clear illustration of the fact that sacrificing during a few years a little bit of France in order to deliver much better buildings a few years later after completion, it's clearly here shown in terms of additional performance for Gecina [shareholders].

Last but not least, of course, in our total return approach, the market effect. And here, we are clearly benefiting from the centrality of our portfolio. We will see the valuation of our portfolio that the most central location, because of scarcity, are benefiting a positive impact, of course, in terms of France, but also in terms of CapEx compression.

I will not come back on the figures, Page 38, because we have already talked about them. So if we focus now on the first pillar for total return which is, well, I'd say, the operation, the EUR 5.95 per share FFO, it's more or less stable compared to last year. But what's interesting is that it is the result of big moves in our P&L. Because as you can see on Page 37, the change of perimeter has fully impacted our FFO. First, thanks to deliveries, we have considered more than EUR 50 of additional rent coming in our P&L, thanks to the deliveries we've done in 2018 and 2019.

And these numbers are more than compensated. First, the reselling of the pipeline, minus EUR 10 million. And as Méka said previously, and we will come back to that in one second, we have today a pipeline which is, in terms of size, more or less the same level than what it was end of 2018.

And of course, the disposal. Here, we are talking of the impact of many of the disposals we had end -- during 2018. A large part of the EUR 42 million of impact of the disposal is coming from the -- of this portfolio we sold in the French region in 2018 -- end of 2018.

So second engine of the total return, of course, the NAV. If we adjust our NAV from what are the payments of the dividend and IFRS 16, that's a growth of more than EUR 21 per share, we end up with NAV of EUR 175.8 per share. This is an increase of almost 9% compared to last year.

What's interesting here again is that you can see the impact or the positive impact of the different pillars of our strategy, of course, in terms of operation, in terms of rotation and in terms of pipeline. We have also, of course, as I said previously, benefited from the positive impact of the market, thanks to the centrality of our portfolio.

And this is a result of the valuation, of course, of our portfolio. And you have on Page 41 the main figures of this valuation. We have increased on the like-for-like basis of 7%, resulting on a small cap rate compression. We were at 4% globally speaking; 3.8% end of 2019, which is resulting, of course, on the impact of this cap rate but also on an ERV increase, which is something for us very positive.

When you look at this valuation, they are still, we can say, conservative because, when you look at the trend we have seen in the market during the end of 2019, we see a lot of transactions below 3% for prime assets. And this is something which has been confirmed beginning of 2020. So we are clearly very positive on the trend of this valuation for the coming months.

And you can see also the value per square meter, which is also quite conservative. If you look at the provision of this portfolio, we are at -- below EUR 20,000 per square meter, and we had seen a couple of transactions once again end of last year at amounts which were actually above this amount.

I said that we were optimistic regarding valuation. We are, of course, even more optimistic regarding our pipeline development. As we said, we have refueled pipeline development in 2019, and you can see that there is a lot of growth and value creation embedded in this pipeline. We are delivering this growth at the [path of the works] of the building, the preleasing, the delivery. So there is still a large amount of value to be extracted from this pipeline.

You remember, we have a pipeline of almost EUR 3 billion if you take the committed and secure pipeline, which is going to be launched shortly. And with an average yield and cost of 5.6%, if you compare this 5.6% to the value -- today's cap rates we see in the market of or valuation in our own portfolio, you can see the value-creation potential coming from this pipeline knowing that there is only, I would say, EUR 200 million of this value, which is today booked in NAV.

Now if you move to the liability side of our portfolio, we had once again a very active year on the financing. We have raised for EUR 1.7 billion of new financing. We have redeemed EUR 1.8 billion. Always the same trend. The idea is, of course, to extend the maturity of our financing, to decrease the cost of debt.

And you can see on Page 43, there's a trend that we have delivered over the coming years. But what -- I think what's very important for us is not only, I would say, the metrics of our debt but also the quality of this debt, the quality in terms of responsibility. And you can see that we are seeing [some story] to the lines that we have signed during this year, increase the size of our responsible financing in our balance sheet to almost 20% at the end of 2019.

But I would say also, the quality in terms of flexibility of the debt, we have reimbursed almost all our asset-backed financings during the year. So we are not only financing [those] and bank financing.

And also, of course, the liquidity that we are benefiting. Liquidity, when you looked at today, all the, I would say, redemption financing schedule, which is really quite smooth across our (inaudible) structure; and of course, something which is very important for us, which is all the liquidity we are benefiting, the undrawn bank facility which are at above EUR 2.5 billion.

Maybe to conclude, one word on the structure. As you have seen during the presentation, we are very positive and very opportunity -- sorry, positive on the structure because of all that we've done in just -- all that we've done in terms of reshaping the portfolio, all that we've done in terms of refueling the development pipeline, in terms of deleveraging the company to be able to seize opportunities if we find opportunities in the market, of course.

And all these very, I would say, elements are giving us a lot of comfort on, of course, the coming years, in terms of future growth, in terms of FFO. You know that we have almost EUR 130 million to EUR 140 million of additional ones which are going to come in the next 5 years from the development pipeline.

We have all this value creation, which will be also a driver of our NAV growth for the future. And if you look on a more short-term period, of course, all these actions and more specifically the disposals and the refueling of the pipeline have an impact on our -- will have an impact on our 2020 FFO per share.

But this impact, in fact, is quite limited because we'll be partly [offset] by the delivery. So we are targeting a decrease by 2.5% of our FFO per share for next year. And if you adjust from the disposal we've made in 2019, it will be an increase of 2%. Thank you for listening, and we are now open -- ready to your questions.


Questions and Answers


Mahkâmeh Brunel, Gecina SA - CEO & Director [1]


Thank you very much. Now we are opening the floor to the audience and people online. Ask your question, and we are pleased to answer as much as we can. Yes?


Florent Laroche-Joubert, ODDO BHF Corporate & Markets, Research Division - Analyst [2]


Florent Laroche-Joubert from ODDO BHF.


Operator [3]


(Operator Instructions)


Florent Laroche-Joubert, ODDO BHF Corporate & Markets, Research Division - Analyst [4]


(technical difficulty) EUR 2 billion of assets. And in the same time, you have lowered your amount of nonstrategic assets. So what can we expect in 2020? What will drive your disposal of China?

So as a second question, I would have a question on the residential portfolio. So we understand that you are developing this portfolio, so -- with institutional investors. So could you please tell us what is the first feedback of institutional investors? Is it -- can you add some impact with the election that will be held in March? And so what can we expect in terms of performance of impact that's in our level?

And so maybe a third question on asset swaps. Do you ambition to do more asset swaps in the future?


Mahkâmeh Brunel, Gecina SA - CEO & Director [5]


Yes, thank you. Many thanks for these 3 very good questions. I will start with the asset swap. Gecina has really developed a know-how in asset swaps, [Madame Les Bere, Antoine de la Christine]. We are now -- well, we have done that starting, by the way, with Rue de Madrid actually a couple of years ago.

We have really developed a real know-how and capacity on that. And definitely, this is a way also to dispose some assets which we consider these are mature. And to swap to a more -- an asset which can drive value creation to do redevelopment, which is exactly what we did with the huge Carreau de Neuilly.

There's a lot of conversations ongoing under your control, [Roma], but globally speaking depends if it works or not. Actually, what we consider, which is very important, is the asset -- the acquisition we are running, and this is most important, makes sense and would continue to drive value creation. And we will keep the discipline.

So this is something which definitely leads all our investment. As we always say, we are not neither a forced seller nor a forced buy. But if opportunities come up, definitely, we're going to catch them and seize these opportunities.

So this is not something we can program, but definitely, this is part of our know-how and -- and this is a privilege to be capable to offer. And then also the size of our portfolio give us the capacity to offer those kind of asset swaps.

Typically, if you look at Carreau de Neuilly, the pension fund of the Caisse de Retraite du Personnel Navigant [in France] which is for the Air France pilots and stewards, this pension plan, they need it. They were much more interested to keep part of their money, part of their investment in the real estate, but they didn't want to manage a building.

And this huge asset of 33,000 square meters needed a huge amount of CapEx to be run, et cetera, and this is very difficult for pension funds, for small insurance companies, et cetera, to do it. So this is something that this is a win-win type of transaction we can lead. But Gecina has this capacity because of the size and the centrality of the portfolio.

Now on our disposition program, we, of course, in our budget, consider some amounts of investment, some amounts of dispositions. But again, the discipline makes sense. And we are not going to sell at any price. We are not going to sell under pressure. We are not going to dispose. And there is no more need for that.

We had a very strict program. When we bought Eurosic, we said that we would like to be below 40% of LTV. As far as you remember, we said that we're going to sell 1.2. We sold more than that. We sold 1.8 where we went below 40% because this is something which gives us comfort for the future to be capable to seize new opportunities.

But from now on, this is much more about our asset management and our capacity to consider that this is time to rationalize the portfolio. We still have some one-off assets here and there, but it's still asset management to be run. And with the new organization which has been put in place, those on the multi-res and on the office portfolio gives us the capacity to run those asset management analysis and to be capable with the support of our investment team to say that it makes sense and also seize the opportunities of the market with the market cap going down.

So it's a way sometimes these prefill assets would become -- would lose more values than central assets to be sold. That's why we are focusing on these assets maybe to rationalize and to create the clusters of buildings to also develop services within our different buildings, within our different clusters. The third question, I forgot. Do you remember?


Nicolas Dutreuil, Gecina SA - Deputy CEO of Finance [6]


Resi portfolio.


Mahkâmeh Brunel, Gecina SA - CEO & Director [7]


Oh, resi portfolio. There's a real interest of investors to be invested in a dedicated resi portfolio. They are invested maybe differently, and they can be invested on both levels. But this is not going to be exactly the same thing because already new [SPDs,] it's not going to be a listed company. So this is not the same type of investment that they can have in a listed company on the upper level.

There's a lot of interest of investors today in the market to join the [SPD] to be -- to partnering up with us and to bring capacity and money to also increase the size of this company. So we see a lot of interest. For now, we have also a couple of other administrative issues to fix, especially the AGM.

Ultimately, what has been approved by the Board of Directors needs also to be approved by the AGM on the 23rd of April, and we are very respectful on the capacity of AGM to have this approval first. And there's a lot of administrative things to create and to run before this company is going to be created.

But before that, we are working on different items to make it look how we can extend the portfolio, how we can bring in new investors and what is the best way of doing this is work to be done, but we feel very confident about that.

And to your question, is the regulation with the election -- municipality election in March, we do not see that much. Again, if you listen to what all the candidates are putting forward, there's a real, real need for multifamily portfolio. For the capacity of large institutional to be capable to drive, to run and to develop and to develop also services.

This is something which is very -- which is seen in the market, and there's a real need. And also, we also -- today, we already -- we have a lack of supply for what people need today. So this transformation is something -- and the market exists. The market exists, of course, in Paris Region more than ever, but it also exists in different other metropole, in different regions of France.

So we do feel that this is not something -- and if you listen to what different candidates have put forward in terms of their strategy for multi-residential, they are no more only talking about social housing but middle-class type of multifamily to meet the need of the population -- of the working population. And this is something which is quite new if you listen to what they are putting forward.

And what is also changing in France, this is my last word, I promise, is the fact that the subsidized -- the tax-subsidized, which is carried by all of us French people taxpayers here, represent EUR 4 billion subsidized to individuals to become landlords for the year and to let the apartment. It represents EUR 4 billion per year. Probably this EUR 4 billion can be used more thoroughly through a global policy that is going to be implemented in the coming period. And we work, by the way, hand in hand with the minister, with all the municipalities, with different institutions. And more to come on that side.

We have -- just I will take one question online. Jaap Kuin from Kempen. Jaap, over to you.


Jaap Kuin, Kempen & Co. N.V., Research Division - Deputy Head of Real Estate [8]


Maybe also my first question on the residential subsidiary. In terms of kind of fairness, what to expect given that you need AGM approvals in terms of potential contributions. Will this, for sure, only happen post the AGM in April? That will be the first question.

And then the second one on vacancy. It currently stands at 6%, slightly up, probably due to deliveries. What part of the 3% like-for-like growth expected for this year consists of vacancy reduction? And can you maybe detail your hopes for further leasing at Carre Michelet?

And then maybe on the annualized gross rent bridge. Finally, you say that the EUR 665 million number includes the impact of assets to be transferred into the pipe this year. So it does include no rent at all for the assets that will be taken out of operation this year? Or is it kind of the annualized contribution that we'll still have for 2020?


Mahkâmeh Brunel, Gecina SA - CEO & Director [9]


Thank you for these 3 questions. Can you please re-ask the third question? I'm not sure that I got your point.


Jaap Kuin, Kempen & Co. N.V., Research Division - Deputy Head of Real Estate [10]


So that was on the annualized gross rent bridge you published, where you adjust the number for the assets to be taken out into redevelopment. And I was just wondering whether that includes the full rental value of the buildings that will be taken out during 2020 or if it still includes the partial contribution to earnings in 2020.


Mahkâmeh Brunel, Gecina SA - CEO & Director [11]


Thank you. Okay, got you. Thank you very much. Nicolas, well, the AGM -- just to the AGM question, I'm very respectful of the vote of our shareholders. I don't see any issue, but we need to -- of course, to respect the vote. But yes, it's going to take place. And as soon as we have the vote -- and we are not waiting for the vote for doing whatever we have to do in order to create a subsidiary, and there's a lot of administrative things around that, but -- and [mainly why,] by the way, Frank Lizin's teams continue to work on a day-to-day basis. So this is not something that we are concerned about.

Nicolas, on the other question, just over to you.


Nicolas Dutreuil, Gecina SA - Deputy CEO of Finance [12]


Yes. First one, so on the like-for-like for [vacancies] we consider that we should add, I would say, an occupancy rate stable during 2020 compared to 2019, meaning that the plus 3% should come from reversionary potential and from indexation.

And regarding your third question on the annualized rent, in fact, the annualized rents are a picture of what we have in our portfolio at year-end, so year-end 2019, meaning that we are excluding from the annualized ones also runs of the assets which has been transferred to the pipeline during 2019. And we will see what happens in 2020. Maybe we will have some additional coming, but we will have also some deliveries to come in front of this one.

So when we look at the guidance we are giving for 2020, in this guidance, we are, of course, considering rents coming from the pipeline, rents -- so loss of rents -- or temporary loss of rents of the asset transferred to the pipeline and, of course, the impact of all the disposals we've made in 2019 -- disposals, which has been made during the year, because you remember we have [solo secured] during 2019, EUR 1.2 billion of assets, among which EUR 0.9 billion have been sold effectively during the years and EUR 0.3 billion are going to be sold beginning of 2020.


Mahkâmeh Brunel, Gecina SA - CEO & Director [13]


I will take a question in the room. Please present yourself for the benefit of our colleagues -- of your colleagues over the phone.


Bruno Duclos, Invest Securities, Research Division - Financial Analyst of Real Estate [14]


Bruno Duclos from Invest Securities. My first question is a follow-up on Carre Michelet. Could you give us an update on the leasing? And to understand the fact that you are calculating the guidance with a stable occupancy rate means that you are not very positive on the letting of this asset on -- in 2020.


Mahkâmeh Brunel, Gecina SA - CEO & Director [15]


Of Carre Michelet?


Bruno Duclos, Invest Securities, Research Division - Financial Analyst of Real Estate [16]




Mahkâmeh Brunel, Gecina SA - CEO & Director [17]


Oh, no, no, no, we -- it's completely -- you go ahead.


Nicolas Dutreuil, Gecina SA - Deputy CEO of Finance [18]


So no, we are, of course, comfortable, but when you look at the size of the portfolio, leasing the remaining part of Carre Michelet will have a limited impact on our rents next year. So that's more the issue. Of course, we are confident, and our teams are working out on these assets like on the others.


Mahkâmeh Brunel, Gecina SA - CEO & Director [19]


Carre Michelet was a concern last year. And I mentioned that when we were presenting our results last year -- by the way, La Defense has stopped last year at some point. I mean nothing was moving over there for at least 6 months I must say, but in the second half of the year, we saw a real shift in that area. We leased partially -- I mean, we completed the leasing of Carre Michelet, and it's ongoing. We feel more confident this year than last year. And this is not an issue globally speaking, so this is not a concern at all, but it used to be because nothing was happening in La Defense. By the way, you noticed that the vacancy rate in Paris Region is below 5%, including in La Defense, which is really the turning point. So this is really transformational, which means that there is an absorption, and there's a real demand that needs to fit with good buildings, good areas and good quality of the construction.


Bruno Duclos, Invest Securities, Research Division - Financial Analyst of Real Estate [20]


I have another question regarding the residential portfolio. You are mentioning the -- you are saying that size matters and critical mass. What would be according to you a good size for this portfolio or a minimum size to maximize?


Mahkâmeh Brunel, Gecina SA - CEO & Director [21]


We own 6,000 roughly apartment units. We consider that -- usually, it is considered that 10,000 units, it's a minimum. Why? Because multifamily is about -- it's a retail business. It's a B2C type of business. So you can rationalize the services, the way you are managing, the way you are acting, et cetera, by having a bigger -- a larger critical mass. This is something we can consider. Having said so though, again, Gecina is not going to give up the discipline we have always implemented in terms of investment and value creation. So we're going to look very hard at what you are doing. So this is not an obligation of investment, but this is a potential capacity we can have. Already we are looking at a couple of portfolio and/or development with our investment team since, by the way, we have announced to the market that we are creating a subsidiary. So more people are coming to us considering that this portfolio matters and it's going to be redeveloped.


Bruno Duclos, Invest Securities, Research Division - Financial Analyst of Real Estate [22]


Last question. What is your view on what is happening in several countries and especially in Berlin about the freezing of housing rents? That's a concern that we have also in Paris Region. What...


Mahkâmeh Brunel, Gecina SA - CEO & Director [23]


I don't believe that these things are comparable. I know quite well the German market and Berlin in particular. There are a couple of comments on that [maybe] thinking. First of all, there's a big, big difference between the France structure of multifamily for middle-class people compared to the German or to the North American way of doing this. Most of -- in Germany, this is a leasing market, so people do not own that much of their apartment or their flat. They are -- they lease their flat most of the time. The question in Berlin is the question of pricing moving up very shortly because of speculation and the fact that there was no limit on that. You have already noticed that in Paris -- in the Paris Region in general, we have rent control, which is in place for many, many years. By the way, Gecina -- the previous type of management before '17, we saw our rents going down even under rent control because we were not applying the rent control the way the law has been set.

Now the new team again has now applying the lowest weighting. The French structure of multifamily is in the hands of individuals and the EUR 4 billion cost for the budget for our taxes as taxpayers in this country. This is the consequence of individuals which have been subsidized largely to buy an apartment for -- by the way, this was a complement to their pensions. This was considered like this. So now today, as this is shrinking, this is moving, let's say, to institutionals like us. And as far as Gecina is concerned, we are applying the rent control, and we do consider that rent control give us also the capacity to create value even though it doesn't because there's a lot of potentiality in the rent control laws that we can apply and create value. And the reason we can do it is because we are professionals. We are not a new entrant in this business. We are in this business for the last 60 years so we know how to manage. And the quality of our teams and their capacity to create those values matter.

So on the -- I will take one question online. Celine Huynh from Barclays.


Celine Huynh, Barclays Bank PLC, Research Division - Research Analyst [24]


Meka, can you tell us a bit more about your external growth profile going forward because this is quite important for your future EPS guidance? I'd like to know mostly about acquisition. And you've been quite active on disposal for the last 2 years. Your LTV is dropping to 33%, but the market is still very hot, as you said. So what's the rationale for deleveraging?


Mahkâmeh Brunel, Gecina SA - CEO & Director [25]


Really good question. The rationale for deleveraging is just about asset management strategy and the total return strategy. We keep discipline about that. If we consider that the value has been created, we'd rather dispose than keep the assets. And maybe one day, we are not capable to sell it because we have renewed the lease package, it has been sold once we have renewed the lease, and we have considered that the value has been created. And year after year, of course, we will lose value because the lease length will be shortened.

So this is just about discipline. It's not deleveraging for the sake of deleveraging, although we feel much better again to have -- to be at 33%, 34% rather than more than 40%. And this is a discipline we would like to keep and will give us the opportunity to seize opportunities of investment. But again, the discipline matters.

We still have to rationalize, of course, not as much as we have done before but to create value. But if you look at our portfolio, look, during the last 3 years, early '17, we -- Gecina used to own EUR 12.3 billion of assets. We bought Eurosic and a couple of other assets. We were not that meaningful so we go up to EUR 19 billion. That's considered this way. During the last 3 years, we disposed EUR 3 billion -- more than EUR 3 billion, and we acquired something like EUR 500 million. And because of the pipeline and the value creation, again, the total return strategy, we have created more value than what we have sold. So the -- our portfolio, which should have been around EUR 16 billion now is at EUR 20 billion because we have created value through the pipeline. So this is a combination of this strategy: value creation through repositioning our portfolio, disposition of major assets or nonstrategic and exceeding opportunities when we have the opportunity to do it. Now of course, it's easier when you are weight-lighted to seize opportunities, to run fast rather than to do it when you have a heavy weight. We are transforming another weight because I lost 10 kilos last year to muscles. I'm not yet on the muscle side as far as I am concerned, but Gecina definitely is today.

Question in the room? Yes?


Pierre-Emmanuel Clouard, Kepler Cheuvreux, Research Division - Equity Research Analyst [26]


So Pierre Clouard from Kepler Cheuvreux. Just to come back on the last question. Is it possible to see Gecina going abroad or in other asset classes? Just a follow-up on the last question. The 2 other questions are more technical questions. So the first one is on the ENGIE tower. So it's almost open today to see ENGIE leave the tower in, I don't know, 2023, 2024. Can you tell us the reversionary potential at [Porte Danois] on this tower compared to current trends and, if needed, the CapEx that would be necessary to refurbish the tower?

The last question is on the BCG so re-lease on L1ve building. So could you tell us if the value creation coming in with this signature is included in the 2019 NAV and, if yes, what is the...


Mahkâmeh Brunel, Gecina SA - CEO & Director [27]


I will start by the last question. BCG has been signed, I believe, it was the last day of January. So definitely, it is not in our NAV by the year-end because usually, you can maybe take a couple of days, early January, but definitely end of January, it's over. The accountants have already done their numbers, so we -- you cannot integrate it. So you can see it probably for the part we can take, by the way, in our midyear NAV but definitely not this.

ENGIE. As far as ENGIE is concerned, we still have 6 years of firm lease in front of us, and so 6 plus 2020 is 2026. You showed that our numbers go up to -- on our pipeline up to 2025. I think we have a little bit of time to think about what we're going to do with the ENGIE tower, which is a beautiful tower, high-quality, very good construction, meeting a lot of sustainability items even today. It has been built at a much higher standard that was the standards at that time in France. And definitely, it's a very good building, but we are not yet going to discuss any question of further CapEx or whatever.

By the way, I'm a big fan of an accountancy rule, which is AIS 16 (sic) [IAS 16]. As you probably may know better than me, you have to book on both liabilities and assets the amount of firm period of leases remaining and rent you owe to the landlord. And ENGIE has done that for older firm periods like all the listed companies. You can find it in their books. And so if they have to leave, they owe us the remaining period anyway, but we are not yet under any discussions of this kind. Again, 6 years is a lot of time, so we'll see.

In other places, well, today, definitely, a couple of comments. Today, we are not contemplating any acquisition anywhere in outside of our -- outside of Paris Region, by the way, as far as the office portfolio is concerned; on the multi-res, we said in different places in France, of course. But when you look at what has been done, for instance, by Covivio or the quality performance of Colonial, I'm -- which I would like to congratulate both of them, you can consider that today there is no more an issue. I hope not even for you, analysts and portfolio managers, to see an expansion if it works, but this is again about discipline, opportunities, capabilities. And of course, when you tiptoe out of your, I would say, domestic markets, you need to make sure that you have the best team in town with you. So it's not just about buying one-off assets here and there and just about making a major move. Today, we don't see anything like this. But anyway, you'll never know. This is not a real concern, although might be an opportunity.


Pierre-Emmanuel Clouard, Kepler Cheuvreux, Research Division - Equity Research Analyst [28]


Okay. And just a follow-up on this topic. If you had to choose, would you be in Spain, U.K. or Germany today?


Mahkâmeh Brunel, Gecina SA - CEO & Director [29]


And you want the name of the corporate we are considering?


Pierre-Emmanuel Clouard, Kepler Cheuvreux, Research Division - Equity Research Analyst [30]




Mahkâmeh Brunel, Gecina SA - CEO & Director [31]


Yes. Okay. Yes, I mean, we are not yet there. I mean we have just worked hard to deliver you the numbers for today, so...

Any other question in the room? If there is no other question, I'm stubborn, so maybe we can have the film of our achievements. It will be good. Thank you.



Mahkâmeh Brunel, Gecina SA - CEO & Director [32]


Okay. If we have the movie at the beginning, I wouldn't have to explain all the numbers, so thank you very much. By the way, this is about 2019, but in 2020, you will see Nicolas Dutreuil as the [PRO] of the financing. So in our achievements of the year.

Maybe we can take a last question from Marie Dormeuil, which showed up now. Marie, over to you.


Marie Amelie Charlotte Dormeuil, Green Street Advisors, LLC, Research Division - Senior Associate [33]


I just had 2 questions. If you can give us just a little bit more color on the plan for Carreau de Neuilly, the time line that you envisage and, of course, if you can give us indication of what's the immediate yield maybe that you have on this acquisition. And then another question is on your dividend. So of course, you don't give guidance for 2020. But given you have guided towards earnings that are slightly down for 2020, is it fair to expect the dividend are going to be flat? Or do you intend to grow it up and then potentially getting closer to the 100% payout ratio?


Mahkâmeh Brunel, Gecina SA - CEO & Director [34]


Yes. Good questions. On Carreau de Neuilly, we do not have yet a program. I would rather wait until the municipality elections. We have to work with the municipality. Obviously, mayors are very busy in the campaigning so we are -- we will look at it. We will work on that. By the way, the building is a little bit -- we have a lot of -- we have vacancy in this building, but a couple of tenants are still there. And this gives us to have a little bit of income while we are working on the permits, on the planning and deciding who is going to be the new architect, whatever. We have a lot to do on that side. So it gives us a plan. I don't believe that this is going to be in our pipeline. Maybe next year, we're going to talk about that, but we have a lot to do prior to talking about a real and actual program on Carreau de Neuilly. There's still a lot to do on that side.

On the dividend side, as you probably know, we never give any guidance because it's better to deliver when the good is there rather than promise. Of course, we have less incomes, but we saw that we have -- we're expecting further income EUR 130 million to EUR 140 million. So look at what we have done before, gives you a good idea of what we -- actually, we are keen to do as a management to suggest to the Board in the coming period, but it's over to the executive team of Gecina and all the collaborators to make it happen. And I feel very confident about that.

Thank you very much. If there is no more question in the room and on the phone, thank you very much. Thank you for being with us, and see you soon.

Thank you.