Covivio Stock

Ladies and gentlemen, welcome to the Covivio H1 2026 Results Presentation. I am Mira, the Chorus Call operator. [Operator Instructions].

The conference is being recorded. [Operator Instructions] At this time, it's my pleasure to hand over to Christophe Kullmann, CEO of Covivio. Please go ahead.

Good morning, everyone. Thanks for joining us today. Paul and I are pleased to present Covivio's '26 half year result. Let me start with a quick reminder of Covivio's profile. As you know, Covivio benefits from a diversified business model built around 3 leading platforms on a high-quality portfolio concentrated in Europe's most attractive market. This positioning underpins the resilience of our portfolio and support our long-term value creation strategy. Let me now walk you through our key achievements and performance during the first half '26.

We delivered a solid first half with 2.2% like-for-like revenue growth and a 97% occupancy rate. Our balance sheet further improved with LTV at 38.6% and Net debt/EBITDA at 10.5x. This translated into strong earnings growth with recurring net result per share up 7.3% year-on-year and EPRA NTA per share up 1.6% since year-end. First, let me briefly comment on the current real estate market environment. As you all know, the first half was marked by geopolitical uncertainty, volatile financial markets, inflation concern and an evolving interest rate environment. However, beyond this volatility, the long-term fundamentals supporting our business remained firmly in place. In offices, occupier demand continued to concentrate on prime asset and central locations, reinforcing the appeal of our portfolio. In Germany, -- the structural housing shortage persists, while recent regulatory development has reduced uncertainty.

And in hotels, fundamentals continue to improve with RevPAR expectation revised upwards in the semester and limited new supply across key European markets. More importantly, Covivio is particularly well positioned to benefit from these trends and our strategy is fully aligned with the structural growth drivers. In offices, occupier demand continued to shift towards prime buildings in central location.

This is exactly where our portfolio is concentrated with nearly 90% of our assets located in city center or dynamic business hubs. Our strategy combining prime location, high-quality assets and a strong tenant experience, allowing us to capture demand where is the strongest. In German resi, our portfolio is concentrated in major cities, particularly Berlin, where favorable demographic trends and the persistent housing shortage continue to support demand. And in hotels, we have steadily increased our exposure to a sector benefiting from attractive long-term fundamentals, particularly in Southern Europe. With that in mind, let me hand over to Paul, who will take you through our operational and financial performance in more details.

Thank you, Christophe, and good morning, everyone. So the first half has been active on asset management front for us. which has driven positive results. Starting with Page 10 on portfolio. Despite a muted investment market, we have been able to continue to improve both the quality of the portfolio and its profitability.

Overall, what you see is that we closed for EUR 223 million of disposals in H1, 89% of it being offices outside city centers. In H1, we signed for EUR 124 million of new disposal agreements. In parallel, as you see on the right part of the slide, we spent EUR 312 million of investments with a large part being in hotels, EUR 153 million of acquisition at more than 7% target yield and EUR 159 million of CapEx, mainly related to developments. We will detail it later on, but we progressively increased the yield of our pipeline, thanks to the launch of new developments at more than 7% yield. In terms of investment and moving to Page 11, the main news of the first half relates to acquisitions. We bought through our dedicated hotel subsidiary, Covivio Hotels, 4 hotels in Milan and 1 in Costa del Sol in Spain.

Those acquisitions are very interesting for us for 3 main reasons. The first one is that we increased our exposure to hotel in the south part of Europe, most dynamic market. The second is we buy top-located hotel at above 7% target yield. And the third one is that we benefit from very long-term income visibility, thanks to 20-year average lease term. On the development side and staying in hotels, we delivered in H1 the first redevelopments inside our value-add hotel portfolio. Let's see Page 12. So we will talk more about this value-add hotel portfolio later on today.

If you focus first on this delivery, this is a very interesting example of all the potential of our hotel platform. So we are in this top tourist city with a building where we own the Mercure Hotel and the Méridien Hotel. As you see on the left part of the slide, we renovated the Mercure hotel after having bought the OpCo. We target a 12% yield on CapEx, and we are well on track to it, thanks to a plus 32% growth in RevPAR after the reopening of this hotel in May. And we already booked EUR 22 million of value creation. The second interesting part is that we took over the management of the hotel with our own operating platform WiZiU. WiZiU is already managing the Meridian hotel. And as you can see on the right part of the slide, this has been a great success since its repositioning in 2020.

So by sharing the management of those 2 hotels, we do continue to optimize the profitability and to increase the results of both hotels. Let's move now to disposals and to office, Page 13. We already communicated during our full year results on the signing of the agreement for this new JV on our Thales Campus in Vélizy. The deal has been closed in the first half in April, and the Thales third building has been delivered early July. And now we have a 12 years firm lease with Thales for 38,000 square meters.

Then on German Residential, Page 14. The investment market has been particularly impacted by the geopolitical environment and by the expropriation risk in Berlin. In this context, we focus ourselves in improving the quality of the portfolio with modernization CapEx financed by the disposal of individual apartments. Although the amounts are so far still limited, but we wanted to do more, and we will explain how later on, the yield gap between privatization made at 2.6% and CapEx spending at 7% is very positive for the profitability of the German residential portfolio. Finally, on portfolio, let's see the evolution of the valuation, Page 15. So what we can say is that the asset management work enabled us to slightly increase the value of the portfolio by 0.5% on a like-for-like basis. In offices first, we benefited from the positive reversion on the rents in Milan to compensate further decreases in the business

Hubs and on non-core assets.

In German residential, the rental growth by 3.4% supported the valuation of the portfolio. And in Hotels, the strong performance of the south part of Europe, as you see in the slide, was the main driver of the plus 1% increase in value.

So overall, a resilient portfolio in this semester, gaining quality. The performance has also been good on operating performance, and let me start with the revenues, Page 17. So we recorded EUR 349 million group share in revenues in H1. The decrease at current scope is related to the fact that we recorded an indemnity from Suez when we -- they vacated the CB21 tower last year. So the full indemnity was recorded in H1 2025, and we also have the impact of the disposals. Nevertheless, on a like-for-like basis, you see that the performance has been solid overall with plus 2.2% growth, thanks to 1 point of indexation, increase in occupancy and also increase in variable revenue in Hotel. As you see on the right part, we also gained visibility in our cash flow, thanks to an increase by 1 year of the lease maturity up to 7.4 years.

Let's go now more into details and starting with Hotels, Page 18. So new strong performance in H1. Variable revenue first accelerated their growth in Q2, and they end the first half with a plus 3.2% growth on a like-for-like basis. You see the split on the right side of the slide. The performance has been solid across geographies, exception made with Belgium due to a VAT increase from 6% to 12% -- but on the opposite, Spain has been very strong and benefited from a flight to Europe of tourists in the context of the Iran war. Fixed rents are up by 1.2% in the context of low indexation. You can see that especially in France with 0.1%. But the good news is that indexation should increase next year with higher inflation. Good performance also in office, as you see Page 19. So the semester has been muted on the letting market with again, a decrease in the take-up.

But this hides a strong polarization of the office market in favor of central location and in favor of Grade A buildings with top level of services. This is why in this market, our premium positioning is bearing fruit with 45,000 square meters of new lettings and with 58,000 square meters of renewal alongside 17 years average maturity and a plus 10% rent uplift on those renewals.

On the releases for 18,000 square meters, already 50% of it is re-let or under exclusivities, so should be signed in the coming weeks. This drives an increase of the occupancy rate by 50 bps, as you see Page 20, up to 95.6%. And I would say a good 1.6% like-for-like rental growth despite a continued decrease of indexation, which should increase again in 2027. Then German Residential, Page 21, we recorded a positive semester with a plus 3.4% growth in a context, first of all, of lower indexation in Berlin and North Rhine-Westphalia, which is temporary.

And another temporary effect, which is the increase in vacant apartment for tourism, modernization programs and privatization. You see on the right side of the slide that there is reasons to be optimistic for an acceleration of this growth, thanks to the New Mietspiegel in Berlin, which grew by 6.7% for our own apartments. So that's for the rent and the operating performance in Hotel. You also probably remember that we mentioned our target to increase other source of revenues, and that's what we did in H1. First of all, and moving to Page 23 with the asset management activity. We are not a third-party manager, but we like to partner with institutional investors in order to manage risk, to accelerate growth and to improve returns. Since the start of the company, we developed this model.

We now have 10 partners institutional investors in 31 JVs for a value externally owned of close to EUR 9 billion. You see Page 24 that this activity has created a recurring and a growing source of revenues over the years. We expect for 2026 full year around EUR 40 million of revenue, up by EUR 7 million versus 2025. We are keen to continue to develop this activity as it is a recurring source of revenue with long-term contracts. It enables us to limit the cash spending, and it's a diversified source of revenue with multiple of JVs and partners.

Second source of ancillary revenues is related to development margin and fees, as you see Page 25. So development margin has been also a recurring source of revenue for Covivio despite its volatility. You see that on the slide, on average, EUR 20 million over the years. We have two kinds of development margins. The first one is build-to-sell program. The second one is when we develop in JVs such as for Thales in Vélizy. Covivio acts as a sole developer and take the risk. In exchange, we benefit from a development margin when the JV buys a project above the development cost paid by Covivio. It's also a diversified source of revenue for us, thanks to projects that are in France, in Germany, in Italy as well in Office, in Hotel and in Residential. You can see some example on the right part of the slide. This activity has grown significantly in H1 '26 with EUR 26 million of margin booked, and we expect the total level of margin to reach EUR 35 million for the full year.

Let me now move to the results and first to the adjusted EPRA earnings, Page 27. So that leads to an increase by 7% year-on-year of our adjusted EPRA earnings at EUR 282 million and EUR 2.55 per share. If we focus on the bridge on the slide, first of all, Suez departure for CB21 has reached its highest impact -- negative impact in the H1 2026 as we were still receiving the rents in H1 2025, and they paid, as I said before, an indemnity last June 2025.

This explains the minus EUR 18 million you see. This impact, more importantly, will progressively be reduced in the next quarters, thanks to the good re-letting process of this tower. Secondly, the rental activity, excluding CB21 has been very positive across the board, as we have seen right before, and we recorded a plus EUR 12.7 million of revenues and the rents of our companies accounted under equity methods bring EUR 3 million of additional revenues as well. Asset management revenues are up by EUR 5.7 million, thanks to new JVs and the results from other activities relates to property development margin and are up by EUR 15 million. In parallel, and again, this year, our balance sheet has further improved in H1, as you see, Page 28. Lower LTV down to 38.6%, lower Net Debt/EBITDA down to 10.5x. We also kept a low cost of debt, thanks to a debt which is hedged at 85%.

And in this context, S&P has confirmed last April, its BBB+ rating for Covivio. Finally, on the results, let's move to net asset value, growing by 1.6% for the NTA over the semester to EUR 84.2 per share. Bear in mind that the second dividend payment has been made last July 15 (sic)

[ July 17 ]. Thank you, and I now let the floor to Christophe.

Thank you, Paul. Let me now turn to our key strategic priorities for the months ahead. First priority is to continue rebalancing the portfolio across our 3 asset classes and increasing centrality. In simple terms, more hotels, more Southern Europe hotel, more city center office. We are making good progress towards our 2030 target with hotels now representing around 24% of the portfolio. At the same time, we continue to enhance centrality with 73% of our offices located in city-center and 92% of our hotels in top tourist destinations. Another lever to increase our hotel exposure is Office to Hotel conversions. A good example is Voltaire, a newly committed project in Central Paris, which will transform an office asset into a 165-room 5-star hotel complemented by a sports club.

Including our 3 other committed projects, our conversion pipeline now represents nearly 600 rooms with a target yield on CapEx of around 8%.

As we work on the rebalancing of our portfolio, we remain equally focused on extracting value and growing profitability through active asset management. And this come with our value-add CapEx program in hotels as shown on Slide 35. As a reminder, we have identified 20 hotel redevelopment opportunities, representing 12% of the portfolio with EUR 400 million of CapEx, the projects should generate around EUR 260 million of value creation and a 13% yield on CapEx. This should enable us to more than double EBITDA from EUR 50 million over today to EUR 102 million by 2030. On the next slide, you can see that we have accelerated the execution of this value-add program. Following the 5 project launched in '25, we started 8 additional projects in '26. Beyond refurbish work, several also include extensions or brand changes. We plan to launch 3 more projects in H2, bringing the total number of ongoing projects to 15. Altogether, this project represent EUR 249 million of CapEx with a 13% target yield on CapEx. Another lever to enhance profitability and create value is active operator management.

In Germany, we have just renewed 5 management contracts and partner with operators with strong track record, including Radisson and Odyssey. At the same time, we continue to expand WiZiU our in-house operating platform, which now manage 25 hotels and more than 3,400 rooms, representing around 10% of the portfolio. These initiatives give us greater control over asset performance, improve operational efficiency and support further EBITDA growth and value creation. Let me now turn to our office portfolio, where we continue to focus on enhancing quality, profitability and value creation. The first lever is the selective launch of developments in our strongest markets, Paris and Milan, all targeting yield on CapEx above 7%. So the second lever is the value embedded in Land Bank, notably at Symbiosis and Scalo di Porta Romana in Milan. Together, this project represent nearly 100,000 square meters for future development potential. In German resi, we continue to drive profitability through a combination of privatization and rental growth.

We are steadily expanding our privation pipeline while maintaining attractive disposal yields below 3%. On the rental side, we continue to capture upside through indexation, strong reversion on reletting, selective modernization program and supportive market fundamentals. Let me now turn to our third strategic priority, scaling our ancillary revenue streams, which represent an additional source of recurring growth.

The first lever is asset management. We are benefiting from growing demand from institutional investors seeking for experienced partner with strong operating capabilities. With our track record and extensive network of partners, we are well positioned to further scale this activity. The second lever is development management. We have around 160,000 square meters of projects to deliver by '29, which will generate attractive development margin. Beyond that, our Land bank provides more than 160,000 square meters of additional opportunities, creating further potential to partner with investors and generate revenue streams.

Finally, our fourth priority is to develop hospitality-led services, building on our unique expertise in hotels and customer experience. Our ambition is simple: transform our buildings into destinations that people actively choose, not just places where they work. A good example is CB21 in La Défense, where we are repositioning the assets around a hospitality-inspired experience, combining workspace, services, wellness and events. This approach enhance the attractiveness of our buildings, support occupancy and rental growth and but also strengthens tenant loyalty. At the same time, we are strengthening the appeal of our assets through targeted partnership and increasing revenues generated by our shared spaces operated by Wellio, our flexible office platform. Finally, operated resi is an attractive growth opportunity supported by strong structural demand in Germany.

Building on the success of Covivio-to-share, which already managed 282 units, we are now scaling the platform through (Nundinu) Berlin, our flagship mixed-use project in Berlin. With more than 200 operated apartments, (Nundinu) Berlin is another example of how we leverage our operating expertise to drive growth, profitability and value creation. Before closing, let me briefly comment on the appointment we announced yesterday within our Executive Committee. We are pleased to welcome Aude Grant back to Covivio. Aude brings deep expertise in the French office market and will lead our French office business. Many of you already know Alexei Dal Pastro, who has successfully led our Italian and German office activity for several years.

Together, Aude and Alexei will serve as Deputy CEOs and help drive the execution of our strategy. I would also like to thank Olivier Estève for his outstanding contribution to Covivio during the last 24 years.

Covivio is what it is today, thanks to his strong contribution. Let me briefly summarize the key message for this morning.

H1 demonstrates the strength of our model. We delivered solid operating performance across all asset classes, grew our earnings and NAV and continue to enhance portfolio quality, disciplined capital allocation. At the same time, we are executing on our strategic priority and unlocking new sources of growth through active asset management, ancillary revenues and hospitality-led services. With a solid first half performance and clear strategic priorities ahead, we are confirming our '26 guidance of 4% growth in recurring net result per share. And thank you all for your attention. We are now happy with Paul, but also with Olivier Estève and Tugdual Millet to open the floor for questions.

[Operator Instructions] The first question comes from the line of Florent Laroche from ODDO BHF.

I would have 2 questions, if I may, and I can ask one by one. The first one would be on the guidance. So you have had a very strong H1 performance. And so you confirm your guidance. So why today, your guidance is a right -- plus 4% is the right estimate for the year? And how this guidance could be a little bit conservative for H2?

Paul, on the guidance? Paul likes to speak on the guidance.

Yes. Well, as you noticed, we recorded most of the promotion margin in H1. That's the first element. So I would say that we are well on track on this guidance.

It's fair to say that we are a bit conservative, but we also have the effect of short-term interest rate increase for the second part of the year. So that's why overall, we have maintained this guidance.

Okay. And maybe my second question on acquisition opportunities for hotels. So we have seen that you have been very active in H1. What to expect for H2? Are you looking for other acquisition opportunities? So shall we expect something? Or maybe now it's for 2027?

No, I think we have started the year quite intensively and quite happy also of the attractiveness of the opportunity we have been able to seize. And the idea is to continue with this trajectory, still focusing on best opportunities in Southern Europe, mostly lease, but also other opportunities through management that could be also the other opportunities. And so continue with this objective to increase hotel exposure years after years.

And just to complete, we are currently seeing new acquisition mainly in Italy and Spain. So that's -- I hope we will be able to complete in the second half.

The next question comes from the line of Anand Aakanksha from Citigroup.

Two questions from my side, and I'll go one by one. The first one is just on the guidance again. So I see the negatives on the second half for the guidance are increase in finance expenses, low indexation and the CB21 Suez departure. I think my question is, is it reasonable to assume that all these 3 drivers are going to have an equal negative impact on the second half earnings?

Or could you just help us understand which is going to be the biggest driver and then which 2 are kind of rate them, if that makes sense?

Yes, Anand. The CB21 effect should start to be positive actually in H2, thanks to the reletting. Again, we had in H1 2025, this one-off of this indemnity. So we don't -- we will not have again this negative effect in H2 2026. And on the opposite side, the fact that we relet most of the full existing part, so non-dev of CB21 will start to have positive effect in H2. So the main negative is the increase of interest rates and lower property development margin in H2 versus H1.

Understood. And the second question, just on the portfolio split. So pro forma hotels is about 24% at the moment as a share of the overall portfolio.

Is it reasonable to assume that further growth from the 24% to 30%, we can expect it to be split broadly evenly between acquisitions and development/refurbishment CapEx? And could you just remind us of the returns profiles on each of these? So what I'm trying to ask is what are the acquisition yields? What are the yield on CapEx or just refurbishments? And what the spread to the current refinancing rate is?

You gave us a lot of figures in the presentation, but in terms of target, in terms of acquisition yield, we are on average at 7%, including what is a variable part of the rent. So that's what we achieved in '26 and what we would like to continue to have in the future also in acquisition with some asset under management. So that's something that you could keep as a type of value. In terms of yield of CapEx, we give all the details in the presentation. So on average, we are close to 10%, what I can say, perhaps sometimes move. And on hotel -- on office to conversion, we are close to 7%. So that's the yield on CapEx you could take into account in your assumption.

To go to 1/3, the long-term target we have in terms of exposure in hotels, it will be made like in this way. But also we know that one way it could be an increase in our exposure in our subsidiaries. We are continuing to discuss with some shareholders for that. Today, they are not willing to move, but it could change in the future.

The spread to the current refinancing rates?

The current refinancing today cost is...

We are, let's say, around 2.6% on average.

The next question comes from the line of Ana Escalante from Morgan Stanley.

I have a couple of questions, please. The first one is on the pre-letting of your pipeline. How is that progressing, especially for the deliveries that you have in 2026, which I believe is this asset in Paris. Any visibility on 2027, whether your conversation with tenants are being impacted by the ongoing uncertainty and therefore, they are taking longer to make decisions or whether you think that the operating environment remains challenging and maybe the pre-lets will not progress as expected? Any visibility or color on that would be appreciated.

Olivier?

I can give some color on the pipeline, office pipeline. We have pending -- a lot of pending discussion. We are really optimistic on CB21 and that we consider we should reach 100% occupancy rate at the end of the year, of course, for lease taking start in '27, but I think we are really optimistic given the discussion we are ongoing. Also on Beige, we have recently signed a new lease at EUR 1,070 per square meter with incentive in the range of 16%. So we see that the market is still positive as long as you are able to propose the right, I would say, the right product, so meaning central office, as Christophe mentioned, but also with the right combo of quality, sustainability, performance and experience we are able to provide in the building and exactly what we are doing in our offices, putting the stress on all the amenities and et cetera.

So we have also another project under development, but the deliveries at the end of '27, it's what we call Grand Boulevard. And also in this case, we are really optimistic on the development. And we have launched already in Milan, the Vitae project with a significant level of pre-letting, more than 70%.

And we are also pending discussion on other potential projects. So I can say on the pipeline, really a good -- really a good track record. After the last -- at least, but not last, Berlin, our project in Alexanderplatz. In this case, we have already 70% of the retail is pre-let. We have let 100% on the residential part. And we launched the marketing. We have launched the marketing on the office, and we have a really interesting pending discussion on 10,000 square meters and a couple of prospects on 1,000 to 3,000 square meters. So really a lot of traction also on this project and with a market in Berlin on the letting side, which is recovering.

Okay. And then my second question is on your comments regarding the booking pattern that you've seen for the hotels after the outbreak of the Middle East conflict. To what extent do you think that is going to generate a sustainable shift in demand because certain locations are no longer perceived as safe and therefore, demand shifts towards other locations?

Or do you think this is just a one-off for 2026 and then in 2027, we will go back to pre-conflict patterns?

We should reasonably expect that there is a bit of one-off in it because there is a replacement of kind of customer mix. So that's why the figures that we show specifically in Italy and Spain is far more than what we have anticipated after probably more than 3 years of exceptional growth. So we should expect for next year a kind of softening effect if there is a normal world tomorrow. And so a bit of softening in this area. But I have to say, as a reminder, the way we look at hospitality is at a European level. We are obviously looking at Spain and Italy today, but we all know that each countries benefit from different dynamic. And if there is a softening in Spain and Italy, we can also expect better figures for Germany or in France next year.

Next question comes from the line of Martjin Kartman from Van Lanschot Kempen.

Three questions from my side. The first one is on Slide 25. You mentioned a guidance of EUR 35 million of development margins. Can you tell us how much of this is linked to the Vélizy?

Yes. Well, we -- for obvious confidentiality reason with Blue Owl, we don't give precise numbers. But what you can -- what you can imagine is that the growth of the development margin for this year is clearly coming from this project.

Okay. Then my second question, on Slide 24, the asset management revenues made quite a significant jump. And could you give some color on the expected growth rate or ambitions for this income stream maybe in a little bit longer term as well?

Yes. I mean, as I said, for us, it's a recurring source of results based off long-term contracts. Of course, in those contracts, we also -- we have fees on asset management, on rents, et cetera, but we also have fees on asset rotation. I would say that the target, first of all, is to continue to grow this number over the next years. Then we'll give you more details in early next year for the year 2027. But the target is really to pursue this growth.

Okay. And my last question is how many divestments and investments are you currently in discussions for? Can you provide any numbers on that?

As I said initially, really the investment market is really quiet in '26 because of all what we see and what we have in mind in terms of environment. That's why we also decide to lower our investment program in this part because what is key for us is to keep our LTV under control. I have to say we study a lot of acquisition in the hotel sector because that's where we would like to invest and so on.

And we are really -- we have a really strong discipline in terms of investment to reach our target in terms of yield, but also to keep our LTV under control. Today, in terms of disposals we want to push on disposal on non-core assets where today, it's not easy to find buyers. That's why also we will continue to imagine to have a soft amount of disposal in the second part of the year.

Next question comes from the line of Marc Mozzi from Bank of America.

I have 2 questions from my side. Number one is on Olivier Estève departure. Why his mandate has not been renewed? Was it his decision? Was it your decision? Can we have some color on that? And how do you see the meaning of having 2 new CEOs, deputy CEOs for the strategy of the company? What does it mean?

Thank you, Marc. I take it. The decision is the decision of the company. We are close to the same age with Olivier. I think it's important for our company to prepare the future. And that was the decision taken by the Board, first of all, to renew myself and taking that into account to prepare the future in terms of management of the company. Having that in mind, we have -- I propose to the Board the appointment of Aude Grant. I know her for a while because, as I said, she worked with us in the past.

She has a really deep experience in office in France, also working in a European company with Covivio, inside SFL, I think it's really close to what we have. So I'm sure she will contribute a lot for the future. And having 2 Deputy CEOs is also important for us because we are not a French company. We are a European company. And to have -- to appoint Alexei also as Deputy CEO in this environment is also the signal that we are working in this European field. Alexei was really successful in the implementation of our strategy in Italy. Today is also in charge of part of the German business. So I think it's really a key point of the strategy of Covivio for the future.

Makes sense. And the other one is slightly technical, that's for you, Paul, I guess. What are the main differences between your like-for-like number reported, which is for rental income, 2.2% and the one of EPRA, which is 3%. And there is some gaps on every segment, hotels, resi, and offices. Just trying to understand that the biggest gap is in resi, I guess. So just trying to understand what are the main differences here.

Yes. So the main difference is that the reported like-for-like is on gross revenues rather than for EPRA is on net revenues. So as we have some, let's say, reduction of the net charges, it improves the like-for-like for the EPRA part.

[Operator Instructions]

The next question comes from the line of Jonathan Kownator from Goldman Sachs.

Just on German residential, there is a skew towards Hamburg and NRW in terms of like-for-like rent growth. Obviously, we've had new Mietspiegel for Berlin. Where do you expect like-for-like rent growth to trend going forward? And maybe also just to comment on the impact on valuation. There seems to be a bit of yield expansion here. So if you're able to comment, that would be great.

Well, on the German resi markets, first of all, what I think is really important is also this decision for the government to have -- to stop all the expropriation idea and so on. So that's really positive news for the market. We were -- nobody takes that into account, but it was a pending risk that was around us. Secondly, yes, this new Mietspiegel in Berlin is also positive for us. So we have -- we imagine that it will contribute by 1% in terms of like-for-like in the future on top of the current evolution of the rent for Berlin.

And so that's why we could expect future growth of the like-for-like in the next quarter in terms of German resi. After that, the valuation or the value put by the valuer. So that's something that we take into account as an external valuation.

How do you expect the investment market to trend given this latest news on Berlin? Are you already seeing any impact from that or any change in tone in terms of conversation?

Not yet, because it's too early, and it was at the beginning of July, so just 2 weeks ago. But I hope, yes, it will change the way. What is sure, just to be clear, you know that we have these 2 joint venture discussions with 2 French investors that want to go in Germany with us. And just after this announcement, both comes to us and said, okay, now we can restart to look at investment. So that's an example of reaction, immediate reaction for investors that are waiting -- we are waiting since the beginning of the year to have a clear view on this potential evolution.

Okay. That's interesting. If I may, just one last one, an extension of that. Are you -- how are your negotiations with other JV partners? Are you finding more capital is interested in the space? Or is it very difficult at this stage?

Well, what is clear today, there are 2 aspects, especially for French investors. First of all, insurance company raised a lot of equity in the first half.

All the insurance company really has a lot of equity because with the evolution of interest rates and so on, that's something which is positive for insurance. On the negative side, the fact that the country bond yield increased a lot is negative compared to investment in the real estate sector. But what I can share is that since I have to say, beginning of June, I have more discussion with those partners to work with them to use the equity to co-invest in new investment. And it could be also for us a way to continue to increase our third-party asset management activity with new JVs, and we could do that both in resi, but also in hotels in the future.

Ladies and gentlemen, that was the last question from the phone. I would now like to turn the conference back over to Christophe Kullmann.

Thank you, everybody, and I hope to see you in the next days. Bye-bye.

Ladies and gentlemen, the conference is now over. Thank you for participating in the conference. You may now disconnect your lines. Goodbye.

Ladies and gentlemen, welcome to the Covivio 2025 Full Year Results Presentation. I am Mathilde, the Chorus Call operator. [Operator Instructions]. The conference is being recorded. [Operator Instructions]. At this time, it's my pleasure to hand over to Christophe Kullmann, CEO of Covivio. Please go ahead.

Thank you. Good morning, everyone. I'm happy with Paul to present our full year '25 results. And let me kick off with our profile, Page 2. You know our diversified business model, but this diversification, which relies on leading platforms has been incremental to our growth in '25.

See Page 3, the main KPI of '25. Performance has been very solid on operating side, as you see on the left part, on financial results as well, as you see with plus 6% in recurring results per share, plus 7% in dividend and plus 4% in NAV per share. On the balance sheet with a new year of debt ratio improvements.

Let's go more into details our operating performance first with Office, Page 7. In a market where the key question is whether we are on the right part of the polarization in the office market, we have been able to demonstrate another time that Covivio is on the right side. We benefit from a high qualitative portfolio. The best proof of that is simply to look at the occupancy rate, 95.7% for city center assets, 95.6% for the one in the major business hubs.

Thanks to this portfolio quality and to our approach of real estate as a service, we were able to record a very active year in terms of lettings. Page 8, 135,000 square meters of lettings and renewals, on which 81,000 square meters of new lettings. We flag a few examples there. example, let me focus on CB 21 Tower. You remember that Suez vacated 44,000 square meters in this tower in July '25. 6 months after only, we already secured 50% of those surfaces.

Another great achievement is in Milan, moving to Page 9. We are among the leaders of office in Milan with a EUR 2.1 billion portfolio. This is 27% of our office portfolio. The Milan market is very dynamic. See the market figures on the bottom right of the slide, a take-up above the 10-year average and a lack of Grade A building, while 75% of Milan take-up is focused on those assets. In '25, we benefited from this positive environment in 2 ways.

First, through renewal, we secured 20,780 square meters of renewals with a plus 19% increase versus passing rent. Second, through redevelopment, see Page 10. We launched 3 projects in '25 for EUR 139 million with a 7% yield on cost. Let me focus on one of those 3, Vitae in Symbiosis area. Fastweb already our tenant needed more spaces. We managed to extend the existing link for 8.5 years and to pre-let for Fastweb, 75% of this new development with a 12-year lease at delivery in '27.

Moving now to hotel. '24 was about M&A, '25 was about extracting growth from the portfolio. Moving to Page 12. Remember, our deal with S&D, we made at the end of '24. We bought the OpCo of 43 hotels to S&D in order to merge and the propcos of those hotels and get the full ownership. On top of the high quality of this portfolio, there were 2 rationales in this deal. The first one was to transform obsolete assets into new hotels.

And the second one is to optimize the contract with the operator and to choose the right brand. '25 results show the success of this deal, 7.9% yield, 13% value creation extracted in '25, but there is more to come. See Page 13. We didn't catch yet most of the value of this portfolio. It will come in the years to come, thanks to the CapEx program we plan to implement on 20 of those hotels. It is a EUR 760 million portfolio value.

We plan to invest EUR 330 million of CapEx by '28 to '29, thanks to that, our target is to catch EUR 46 million of additional revenues and EUR 300 million of value creation. 5 projects are already committed and 15 will be in '26 or in '27. Another driver for growth in hotels is in optimizing the rental contract, see Page 14. there is many ways to improve the revenue by changing the contract. We can move from management contract to lease.

This is what we did with Radisson Blu Roissy signing a 12-year new lease, which will bring 50% additional revenues. In our management contract portfolio, we can also decide to change the brands. See the example in the middle in Paris [ Montparnasse ] hotel, we will increase our RevPAR by 25% by changing Ibis to Moxy. We can finally change the operator and optimize the contract. We have 2 discussions ongoing with EUR 6 million target saving here.

Operated real estate is a strength for our industry. It enables us to be closer to the end user wishes and evolutions to be more efficient. In hotels, our operated real estate model is illustrated by our own hotel platform. We are not a hotel operator and it is 10% of our hotel portfolio, but this skill is key to get closer to the final customer and to be stronger when it comes to negotiate with hotel operators.

This platform already delivered good performance, thanks to a plus 7% EBITDA growth and a 30% operating margin. Moving to residential, Page 17. We pursue our growth by leveraging our 4 drivers: Rental growth. On average, we were able to get plus 24% rental uplift on new leases, modernization CapEx with a 7% average yield on CapEx Privatization, we sold 186 flats for EUR 72 million above, with 30% margin and on the last appraisal value and also ancillary revenue with EUR 15 million additional revenue, see the detailed Page 18. The revenue are made of build-to-sell development.

This has generated EUR 6 million of margin in '25, but also service to client with energy trading, insurance brokerage, connectivity services. This brings already EUR 9 million of revenues. Last but not least, in resi as well, we intend to push on operated real estate. See Page 19. Operated resi is a long term following more single-person households and students' needs. It is also a profitable one.

See the 30% average operating margin we catch already on this activity. At Covivio, we already managed 420 units in Berlin and want to accelerate. We will do it with 308 new service apartments into our Alexanderplatz development to be delivered in the second half of next year.

And now I let the floor to Paul to present the results.

Thank you, Christophe. Good morning, everyone. So this positive performance of the year is also illustrated by our financial results. Let me start first with the portfolio and capital rotation you see on Page 22. So we continued in 2025, our qualitative asset rotation activity by selling EUR 463 million of assets 72% of it is offices.

And in parallel, we invested EUR 446 million, mostly in CapEx programs in order to increase the quality of our portfolio. Acquisition relates mostly to the opportunistic acquisition of the minority shares in our CB21 tower for less than EUR 3,000 per square meter. The value creation of this acquisition is not included in the like-for-like value growth of the portfolio.

We will now present and you see Page 23. So moving to the portfolio, we stand at EUR 16 billion group share at the end of '25. After more than 2 years of value decrease, our value starts to grow again by plus 2.1% on a like-for-like basis. In office first, the polarization continues. City center assets are growing by 1.7%, thanks to Paris and Milan, while major business hubs are impacted by a lack of liquidity and especially in Germany.

German residential then is gaining 4.9% following the increase of the rents. And hotel is growing by 3.7% on a like-for-like basis. We have here the plus 13% value creation on the former SND portfolio, and we benefit from the good performance in South part of Europe. Let's move now to the financial results and directly to Page 25 with our rental revenues, which includes the operating results of the hotel -- those revenues has grown by 3.7%.

The main driver you see it in the right part of the slide, it's the 3.4% like-for-like growth, which is thanks to 1.9% of indexation, thanks also to the increase in occupancy rate, 1 point and to the rental uplift for 50 bps. Looking by activity, office rents are benefiting from the drivers I just mentioned before and are growing also by 3.4% on a like-for-like basis.

Hotels revenues increased by 1.6% on a like-for-like basis despite the negative base effect of the Olympic game and of the Euro football game in Germany in 2024. So variable revenues are improving in Q4 when we compare to Q3, showing a positive trend for 2026. Those figures also does not take into account the good performance of the former S&D portfolio, which recorded a 3% growth in EBITDA in 2025.

Finally, rents in German residential are growing and are showing an acceleration with a plus 4.8% growth in rents versus 4.3% in 2024. So this rental performance has been the main driver of the earnings growth. You can see Page 26. We recorded in 2025, a plus 10% growth in our earning -- recurring earnings in million euros. On a per share basis, this growth stands at plus 6% as it takes into account the full effect of the new shares created in 2024.

Looking at the main block of the bridge you see in this slide, first of all, portfolio rotation has a positive effect to the results, which is thanks to the reinforcement in hotels made in 2024, thanks also to the acquisition of the former S&D hotels and to the acquisition of the minority shares of CB21. Rental activity brings the bulk of the growth, EUR 20.5 million of additional results.

Ancillary revenues also has been a good driver, plus EUR 12 million, benefited from EUR 10 million of additional property development margin and EUR 2 million of additional asset management fees. Finally, net financial expenses are better than in 2024. This is due to the fact that we capitalized more financial costs in 2025 following the increase of the development pipeline and the increase of the cost of the debt.

This effect will be negative in 2026 with the deliveries of large development projects such as Beige in Paris or ICON delivered in Dusseldorf at the end of '25. Page 27. Moving to the balance sheet. So in parallel of the increase in the results, we continue to reduce the leverage of the company. EPRA LTV is decreasing from 43.5% to 42.9% -- if we include the EUR 386 million of disposal agreements that are yet to be cashed in mostly in '26, that leads to an EPRA LTV below 40% -- 42%.

Net debt to EBITDA is also decreasing from 11.4x to 10.7x. As you see on the right part of the slide, our balance sheet is well secured and our rating has been confirmed by S&P at BBB+ stable outlook. Staying on the balance sheet and with net asset value, Page 28. The growth in earnings despite the dividend payment brings EUR 1.3 per share additional Value creation of CB21 brings EUR 0.4 and the growth in values, EUR 1.8, which leads to a plus EUR 3 per share increase in NTA and plus 4% year-on-year at EUR 82.9 per share.

You notice on the right part of the slide that the NDV is growing faster by 5% due to the positive effect of the deferred taxes decrease linked to the decrease of the German tax from 15% to 10% from 2027 to 2032, which is included in our deferred tax accounts. The outcome of those strong results and of the sound balance sheet is a significant increase in the dividend, as you can see, Page 29. So we will propose to the general meeting a dividend of EUR 3.75 per share in cash, which leads to a growth of 7%.

In order to linearize the dividend payment and in line with the practice of our peers, we will pay this dividend in 2 installments, one in March and the other in July. Let's now focus to 2026. Our priorities. First, Page 31, we want to pursue the portfolio rebalancing. That means more hotels and more city center offices. To this extent, we have a strong start to the year, as you can see in the right part of the slide. Let's focus on the 3 main news in the next slide.

First of all, Page 32. So we signed at the end of December 2025, a new partnership with Blue Owl, an alternative asset manager for closing expected at the beginning of Q2 2026. This partnership confirms the creation of a JV owning the Thales buildings in our Velizy campus for a valuation of EUR 503 million. Blue Owl will take 49% of the JV buying part of Covivio existing shares and also the Credit Agricole Insurance (sic) [ Assurance ] shares in the building Helios 1.

This transaction for Covivio means the disposal of EUR 138 million of peripheral assets at a 6.4% yield net of incentives. This transaction confirms the attractiveness of our portfolio. It brings additional revenues and it participates to reach 80% of office in city centers, and it's also the start of a new partnership. Secondly, in parallel, we are increasing our stake into hotels.

First of all, with the Page 33. So we have 5 projects ongoing of transformation of offices into hotels in Paris and in Bologna in Italy, that represents EUR 407 million of cost, including the land value of those assets. Those deals will enable us to increase exposure to hotel, but also to improve the portfolio quality and to increase the profitability with incremental yield on CapEx of above 9% Hotel reinforcement is also about acquisition, as you can see, Page 34.

So in parallel of increasing through transformation, we also are reinforcing through acquisition and especially in the south part of Europe. South part of Europe, it's 17% of our hotel portfolio today. We target 1/3 over time. So we are under final stage of buying EUR 300 million of hotels in Italy and in Spain. It's actually mostly city center hotel with long-term leases and a 6% minimum yield.

If we include the variable part, we target a 7% yield for those acquisitions that we expect to sign by the end of Q1 2026. All this means that considering the recent asset rotation, we will increase by 2 points our exposure to hotel, as you can see, Page 35. That means if we look versus 2022, a 50% growth in exposure to the hotel business between 2022 and 2026. Thank you.

Now I let the floor to Christophe for the key takeaways.

Thank you, Paul. So just to sum up what we say this morning before the Q&A session. First, we are on track on our target sharing that we shared during the Capital Market Day, last Capital Market Day in terms of portfolio shaping, in terms of new businesses, in terms of ESG leadership and in terms also on growth targets. Really for us, 2025 is really an important year for us.

We are starting really a new EPS growth phase fueled by 4 drivers. First one is hotel reinforcement that means also higher yield than other asset classes, but also asset management then, especially with the hotel CapEx program at 15% average yield. Ancillary revenues are part of our business model and will continue to grow. Finally, hospitality and operated real estate model drive occupancy, but also profitability.

So that leads to another year of growth for '26. See the detail of our guidance, Page 39. So we target a 4% growth in recurring result per share, thanks to the pursuit of good operating performance, active asset management and further growth in ancillary revenues. You see that this guidance includes also some headwinds. We expect that 2 of them, indexation of CB21 letting and indexation are actually transitory and should reverse positively in '27.

So to sum up and before taking your questions, what should we keep from this result publication? First, '25 has been a strong year for growth. And also for implementing structural tailwinds for future EPS growth. We enter into '26 with a good momentum, thanks to the work achieved in '25 and thanks to the first achievement of the first week of the year that Paul just described before.

Thanks for your listening, and we are not now available also with Paul, but also to [indiscernible], Hotel CEO; and Olivier Esteve, our Deputy CEO, to answer your questions.

[Operator Instructions]. The first question comes from the line of Valerie Jacob from Bernstein.

Congratulations on your results. My first question is looking at your 2026 guidance, I just wanted to clarify a few things. The first one is, I assume that the EUR 300 million of acquisition in hotels are in this guideline. And I guess my question is, I just wanted to understand what are the building blocks in your opinion, leading to the 4% increase per share because you said that the capital impact are going to be -- to contribute negatively in 2026.

So I just wanted to -- if you could sort of tell us what's coming from acquisition disposals, is there anything beyond this EUR 300 million and what's coming from the different part of the business?

Thank you, Valerie, we don't give full details of the future budget, but Paul will try to give you some points.

Valerie, of course, I mean, first of all, going to your first question on asset rotation, the hotel acquisition is included, but it will be signed progressively over the year. And in parallel, as you noticed, we have EUR 386 million of disposal agreement to be cashed in. So asset rotation is actually quite even in terms of impact to the guidance 2026.

The main effect is more on revenue growth following also the fact that the performance of Q4 in terms of letting for offices has been strong. Hotels in Q4 has been better. So here also, we are positive. And you notice that the like-for-like rental growth in German residential is strong. So that's, let's say, the first and main block. Then we will continue to increase ancillary revenues.

Those 2 things will compensate the full effect of the CB21 departure of Suez. We are relating, but it's the departure of the lease are progressive and higher financing costs, less capitalized interest and a bit more cost of the debt.

Okay. And my second question is on your capital rotation strategy. I mean you've been very successful lately and congratulations on that. And I just wanted to understand given what you're seeing today on the market, do you think that you will be able to do sort of similar volume this year or even more? What is your take at the moment in terms of rotating offices into hotels?

In terms of rotation and capital allocation, what is important is that we have this roughly EUR 400 million of disposal that had already signed that need to be cashed in. So that will support the financing on the CapEx that we have imagined to spend in '26, mainly in office, but now we're also starting to spend an important amount of CapEx in hotels.

And the disposal we imagine to deliver in '26 could be roughly the same amount that we have in '25, mostly linked to office, not in central location. That's where we want to continue to dispose mostly office today. Also flats in German resi, we want to increase progressively our privatization program and some hotels mostly in Northern Europe. With this disposal, we'll be able to continue to invest in hotels because the acquisition will be focused on hotels in '26.

The next question comes from the line of Vanessa Guy from JPMorgan.

I had 2 questions. The first one is a follow-up to Valerie's one on what is driving the guidance for 2026. Is it mainly from the hotel? I'm just trying to figure out if there are any underlying trends that have improved, which is getting you to this guidance?

And also, my second question is on your disposal versus investment strategy dynamic and how this plays out. Obviously, you have a lot of investments planned in the future, as you mentioned in your Capital Markets Day.

And I was wondering, you have to draw a fine line to maintain that 40% LTV target. So how much of disposals do you have in order to provide the firepower for investments going forward. Are they enough? Or will you have to pull other levers in order to do this?

I don't know if Paul, you want to give more color on what you said, but it's difficult to give more detail as of today.

I mean, it's more across the board than specifically linked to one activity out of the -- of one other. So without repeating myself.

On your question on the capital allocation and so on, our long-term target is to go to 1/3, 1/3, 1/3 in terms of allocation. But what we say also in the Capital Market Day and as I will continue to stress today, it will take time. We are really not in a hurry. We are not the first buyer. We will do that progressively through financing through disposals.

But also you know that we have this idea to increase our stake into our subsidiary in hotels by exchanging shares as we have done that in the past. So we will see how that will be put in place. Really keep in mind that what we want to do is always accretive acquisition per share, and we want also to keep our LTV below 40%. That's really our target. And so that's why it will perhaps take more time, I don't know.

But really, the direction is this one. We will take opportunities. What is really important and what we try to demonstrate during this presentation is that we have a lot of drivers -- and we will push on one and on the other that will depending on the opportunities also where we stand exactly on each topic.

We now have a question from the line of Jonathan Kownator from Goldman Sachs.

Perhaps a question for Tugdual. But it would be great to have your outlook on your hotel market. I mean obviously like-for-like rent growth came a bit down this year. That's just a higher level in the previous years. Can you give us maybe some color on where you're seeing trends, RevPAR and any countries in particular that you're seeing strong and obviously, you're expanding to Southern Europe?

And the second question on the German resi, obviously, very strong growth this year. Are you expecting this to be relatively stable? Are you expecting growth to accelerate? And do you see more CapEx opportunities there to further boost that growth?

Okay. On the outlook and what we see on the market in terms of operating performances, I think that starting with what we've seen in '25 is a good starting point for '26, which means that the trends that has been strong on Spain and Italy will continue to be there. And what we see beginning of this year is still those areas and also cities like Paris, cities like South of France continue to be strong. We see that on the books.

We see that on the preliminary results of January. Probably what could change a bit, and that's also taken into account in our, I would say, forecast is after a difficult year in Germany, Germany should improve in '26. It's been a tough year there in most of the cities, and we've seen that on the performance of our operating portfolio. And this is probably where we are a bit more optimistic.

And then leading the U.K. at the end, it's been quite decent year last year effectively and mostly based on London and Edinburgh, where we have most of the portfolio today. So quite positive. And I have to say that, yes, the beginning of the year is quite encouraging and validating what we are expecting.

Any exposure to the -- I mean, U.S. consumers obviously got a weaker dollar to deal with. Is that any impact on your portfolio? Is that a factor at all?

Yes. So basically, the U.S. customers, it has been a big question last year mostly. And we've seen that nothing has changed. Even it's been stronger. It's been strong in south part of France. It's been still strong in Paris or cities mostly exposed to the U.S. customers. So no drastic trends there. Europe is still cheap for the U.S. customer, I have to say.

And probably what could be a bit different is -- so for the U.S., it has been quite tough last year. And probably it would be a bit better for them, but for the inbound clients going to the U.S. But as far as we see, U.S. customers is still there and eager to travel to the most European cities.

The next question comes from the line of Veronique Meertens from Kempen.

Congratulations on the results. A few questions from my side. So first, another follow-up on the guidance. I think a big chunk of the beat is also explained by your net financial costs. So could you give some color on how much did the capital -- capitalized interest costs actually increase this year?

And can you also give some more guidance on what you expect for next year? And did you also change the way of capitalizing interest? Or is it purely the volume that changed?

Yes. So we didn't change the methodology. It's a methodology which is validated by auditors, so we don't change it. It's simply the volume and the rate as well. You notice that the cost of debt is increasing. In terms of amount, so we have an increase in 2025 by EUR 8 million, and we expect this to decrease by roughly the same amount in 2026. So this is included in the guidance.

Okay. That's very helpful. And in terms of the development pipeline, could you give some additional color on how you see the pre-let going for Beige, for instance, and some of the other projects?

So on the development side, on for example, we have a lot of pending discussion. And it's fair to say that it's a refurbishment project, so difficult for the future tenant to project themselves in the building, but now we are really in the market, and we have, I would say, last week, for example, we have one visit per day, so we're quite optimistic the fact we'll be able to fulfill this building along the year.

It looks like there is quite some pressure on rent levels. Obviously, in Paris, would you say when you look at your pipeline that you can still achieve the rent levels that you've underwritten these project for?

No, no, no, no. We have -- effectively, what you mentioned is right. There is a little bit more supply in Paris, but also more polarization and giving the quality of the building. And I can say that today, the discussion we have are totally in line with our expectation on the rents.

We now have a question from the line of Aakanksha Anand from Citi.

I have 3, and I'll take them one by one. The first one is on the acquisition opportunities in hotels. Could you just give some color on the kind of opportunities that you've been able to find that suits your return hurdles?

Or is it reasonable to expect that the development pipeline, the conversions, et cetera, are expected to contribute more significantly to the portfolio rebalancing target to the 1/3 for hotels?

Tugdual?

So for the opportunity. So basically, I hope that we will be able to give some more detail in the next few weeks on the pipeline that we have secured today. It's a mix of different things. Obviously, we are focusing on Southern Europe. So the most important market are Spain and Italy with 2 very different structure. Spain is very organized, quite and very liquid.

So we have been there for, let's say, 10 years. We know quite well all the hotel operator and investor. And here, we are mostly focusing on investment either on resort on urban. So there is quite a decent level of opportunity even if I would say this is probably one of the most competitive market we have today because of liquidity and, I would say, professionalism of the sector, which is a bit different from what we see in Italy, where there's probably a bit more opportunities for us, considering our long-term view there, the fact that we, as Covivio are quite strong there, so establishing quite nice relationship.

And here, the opportunities are more coming from kind of sale and leaseback opportunities. This is part of the discussion that we have with historical owner that wants to team up with real estate investor and able to sign long-term lease with a mix of fixed and variable. And I have to say that so far, the opportunities there are quite interesting and sometimes branding the hotel and sometimes keeping those hotels with, I would say, a group of families, et cetera. So that's the part of the opportunities that we have.

That's clear. The second question is just on the cash. So there is about EUR 1 billion of cash on the balance sheet, and that has been the case for the past few years, kind of moving between the EUR 0.5 billion to EUR 1 billion. And it feels like there is surplus cash if we consider the recurring earnings, level of disposals and then the dividend and CapEx obligations.

I just wanted to understand what are the priorities for the allocation of this cash? So probably split between from what I can see right now, is it the debt repayment to reach the 40% LTV an increase in acquisitions? Or could a share buyback also be under consideration?

Paul, will let you answer this.

First of all, in terms of metrics, LTV is on net debt. So it already takes into account this cash. This cash is here mostly to reimburse debt that comes to maturity in 2026. And we have a positive arbitrage in terms of remuneration versus the existing cost of this debt that we took a long time ago with a cheap cost. So it's mostly the explanation of why we have so much cash. It's really to get an opportunity in terms of remuneration versus the cost.

And as of today, we are not intending to implement a share buyback program. We consider that we have to finance our development at good conditions, and we don't imagine to do that in the short term.

Understood. And the third one, just on the hotels like-for-like. So obviously, there has been a base effect for this year. But how should we look at a steady-state level of like-for-like rent growth in hotels?

Can you repeat Anand, please?

I'm just trying to understand the -- for the hotels like-for-like rent growth, there's always -- there's obviously been a base effect, an unfavorable base effect for this year, where the like-for-like is up, I think, around 1%, 1.6%. I'm just trying to understand, going forward, what do you think is a more steady-state like-for-like rent growth that we can expect from hotels?

Yes, I'll take it, and Tugdual will complete.

So this year was 1.6%. We expect that to be above this level. As we've seen, in fact, in the past is growth -- overall revenue growth on hotel was always above inflation. So that's the target when we invest in hotels is to overall to beat inflation trends and being able, thanks to the long-term macro very positive view to, thanks to the asset management and the choice that we've made in terms of hotel mix to have performance above inflation.

Yes, what is not taking account is these figures is really all the asset management matters that we will put in place that will help us significantly to do -- to have higher growth in hotels, and that's what we expect for the next years, really thanks to all what we have today in-house.

And some of the example was given by Paul before. So we are really positive on the evolution on the hotel sector in terms of like-for-like despite the fact that this year, inflation is low and because we see this significative trend, especially really in Southern Europe, and we imagine that will really continue there, but also in France.

The next question comes from the line of Florent Laroche-Joubert from ODDO BHF.

I will have maybe some 2 or 3 questions. Maybe the question -- a follow-up question on the guidance. So at the end, so could you please tell us what you take into account in terms of variable revenues for 2026 and you don't take into account and that mean that what could be an improvement later in the year? So that would be my first question.

Really, we don't give a full detail on the P&L because after that, I understand your point, it's probably difficult for you to reconciliate the data today. But I think we are confident on this guidance. You know that in the past, we are always confident. It's a lot of different topics that are inside.

We're also working a lot on the cost side, what Paul said in terms of also improvement on EBITDA margin linked to renegotiation of fees. We have also a lot of topics that are linked to the fact that we are reviewing all the fees with all the partnership that we have that really will be supportive. We have this new partnership that we put in place starting in '26 in German resi, but also with Blue.

All of those topics are taken into account in the guidance. After that, we will not give you the full detail line by line of this budget because we have also -- there are also risks in this guidance, as you imagine, and positive and negative topics. So sorry for that, but we can give more detail.

No, I can understand. And then so I would have 2 more questions. The first one on the CB21 tower. So would it be possible to have more color on where you are today on the letting process. And after that, the last question would be in hotels. So I understand that you are strongly committed in acquisition to come. But after that, are you already looking for further opportunities later in the year?

On CB21, if I understand correctly, the question is how we are doing on the field. I think we have very positive results with 22,500 square meters already relate after the departure of Suez. It's also a very, I would say, dynamic approach of the market with a tailor-made solution for different tenants. And we have targeted also medium-sized, I would say, demand.

And if you compare with some competitors are still focusing on very large demand, I think it's the heart of the market of La Defense today, and we have been able to provide to the people, of course, comfort with the product they will have at the end in CB20, which is one of the best located assets in La Defense and gives also all the amenities needed by tenants today.

And I think we are successful. We are still discussing on other, I would say, with other tenant potential. And I think we'll be able to have the same trends in '26 on that asset.

And just to remember, as of today, we don't let the higher part of the tower, which is the best part because we will put there more works. And we -- so that's the part that will arrive later on in terms of letting. Could you add in terms of other acquisition in hotels that you are looking?

It's, I would say, the summary of what I described before, a mix of different opportunities around Spain and Italy. Basically, the target for us is I would say, minimum size of EUR 30 million to EUR 50 million hotel, obviously, good location and target yield of 6%, which made the return quite attractive for this asset class. It's mostly leased, but we are also looking for quite selective acquisition in terms of operated hotel also in this destination and in France and with this same objective of increasing return and exposure to this asset class.

We now have a question from the line of Markus Kulessa from Bank of America.

First question on -- as usual, on your disposals, which is always clear. Can you tell us what's the effective disposals in '25 and what is signed and which is coming in H1 '26? This would be my first question, please.

Effective disposal, you have that in the slide, EUR 463 million. And in 2026, we will have most part of the EUR 386 million that remains to be cashed in. After that, let's say, spread over the year, I would say.

Okay. And yes, I'm following up a little bit on the guidance. I know you can't help much. But if I got it right, it's just to understand how you get to the, let's say, 19p EPS growth while everyone expected -- so if I understand right, your like-for-like rent growth impact compensates your higher cost of funding.

So the difference comes all from developments, which means you're going to have higher contribution from developments than expected. So is it due to the timing of your development pipeline letting? Or is it the hotels refurbishment, which are already coming in this year? And so what's part of the question? Second one is just to reconfirm, so there's no acquisition or disposal in this guidance.

We have some acquisition clearly on top of what is already taken into account and also the disposal plan that I explained before that is also there. There is really also what you say, development is really a strong contributor of this positive evolution, thanks to the letting that we expect to do or that we already have done in terms of office, but also margin development, especially on the -- also on the disposal on that has a positive impact -- will have a positive impact in terms of results in '26.

What will have -- sorry, what did you should say what will have a positive impact?

The disposal with the stake that we will sell -- that we announced beginning of the year that we will stake to Blue Owl has also a positive impact in terms of development margin in '26.

So how does it contribute to your EPRA EPS?

You will see that in June because it will be done. We need to finalize the disposal, but it will have positive impact. As of today, we will give more color on that, I imagine in June.

We now have a question from the line of Stephanie Dossmann from Jefferies.

Just a follow-up on the guidance still. Maybe in other words, I was wondering about the development of the flex office revenues. How do they develop currently? And what should we expect in '26, please?

Really, what we can say is that really it's a positive contribution and '25 was really good and '26. We imagine that will be better. Just to give you an example, in Lat, our headquarter, we record this year close to EUR 1 million of extra revenue, thanks to what we let on top of the flex part, thanks to all the amenities that we get. It's something that's really developing.

We will push more and more on that. And it's really for us a way really to increase structurally our results. What we see today is really the demand for office is really different than it was before. And our capacity to have this in-house skills today is really a point of strength that really what we implement also in CP21, I have to say, and the fact that we are able to relet significantly in a market which is not so easy in a short-term period.

It thanks to all this hospitality approach that we put in the office sector. You know that we started that 10 years ago. So now it's a long story. It was not easy initially because it was an investment phase, but now it's delivering, and we want to continue to push on that in the future, and it's really -- it will have a positive impact in '26 on top of our '25 results.

All right. Could you give the magnitude in euro million?

This activity is roughly EUR 15 million of revenues. It includes the fact that we let the flexible spaces in the different sites in France and in Milan.

[Operator Instructions] The next question comes from the line of Celine Soo-Huynh from Barclays.

Just one question for me, please. There was a EUR 10 million increase in your income from other activities. Could you help us understand where this growth is coming from?

Yes. So it's coming from 2 things. The main one is the property development margin. We delivered assets in Paris and in Milan. So we've got the margin on build-to-sell. And the second one, as Christophe described, is the increase in the flexible workspaces activities.

Okay. What's the development margin you're achieving in those countries? Can you remind us?

So this line, other activities, half is coming from the flexible workspaces activities and half in million euros is coming from the property development activities.

Okay. It's a little bit hard for us to forecast. Can you help us for next year, what should that number look like?

That's basically what Christophe said. It's this line will increase in 2026, especially also due to the fact that we have this development of Roissy new asset to Thales, which is shared with Blue. We'll give more figures in June, waiting for the closing of this transaction before giving specific details, but you can count on the growth for this line.

We have a follow-up question from the line of Veronique Meertens from Kempen.

Sorry, one follow-up question from my side because I realize we haven't touched up on one topic, and that's German resi and the Berlin elections. Could you give some color on where you see downside risk, how those discussions are ongoing? And if Covivio is also involved in some of the political discussions and yes, how you view the elections in Berlin?

It's always regulation election is always a topic for German resi -- during the last 20 years, it was the case. Well, we are involved. We are -- all the association of all the lenders is working to explain the situation. And the question is really the lack of products and not the current regulation of the rent that is a problem. I should say, they are debate in Berlin as usual before the election arrived.

But what is the feeling of today is that really is really continue to support mainly the activity of landlord, and we imagine that they will be part of the new coalition. And if it's not the case, it could also arrive, but it's really not what we imagine.

As of today, we saw in the past that the Federal court was really strong to refuse the things like the meat and Nickel story or story like that. So we imagine that it will be the case if such ideas will come back in the field. So we don't -- there is a question uncertainty as usual, but we have not a lot of fears directly linked to that.

Ladies and gentlemen, that was the last question from the phone. I would now like to turn the conference back over to Christophe Kullmann for any closing remarks.

Thanks a lot for all your questions, especially on the guidance. And see you everybody during the roadshow in the coming days. Bye-bye. Thanks a lot.

Ladies and gentlemen, the conference is now over. Thank you for participating in the conference. You may now disconnect your lines. Goodbye.