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Gecina signed a preliminary agreement to acquire Nexity's former HQ in Paris for EUR 435m. The office complex will be partially refurbished and should positively impact EPS as from 2026.This project will also help compensate for the loss of rents expected in 2027 from Engie's departure in La Défense.Gecina is one of our Real Estate Top Picks. ‘Buy' reiterated.
Gecina Gecina SA
What happened? Gecina have signed an agreement to acquire a 32,200 sqm office complex in Paris CBD for EUR435m. The complex comprises two adjoining assets; a 25,000 sqm vacant office (Rocher) with asset management potential and a 7,200 sqm fully let office (Hotel Particulier). Development capex for Rocher is estimated to be EUR30-40m, generating a potential yield on cost of 6.2-6.4%, with completion expected in 12-15 months. BNPP Exane View: We view the transaction positively, which appears to strike a balance between attractive development returns for Rocher and short-term income support from Hotel Particulier that will prevent immediate earnings dilution. The acquisition will also complement the company''s existing asset on the same block - 7 Madrid - allowing it to create a mini cluster that totals c.45,000 sqm. Assuming average rents of EUR800/sqm and capital values of EUR13,300/sqm (as disclosed), this implies income of EUR5.8m/yr from Hotel Particulier and a c.5.5% NIY. We have spoken to the company and understand that a yield on cost for Rocher of 6.2-6.4% is achievable assuming rents of EUR925/sqm and capex of EUR30-40m. Taken together and assuming Hotel Particular rents can grow to EUR925/sqm (vs current levels of c.EUR800/sqm), a yield of 4.5% for the complex would imply a valuation of c.EUR662m and profit on cost of c.40%, equivalent to 1.7% NTA accretion. We expect the acquisition to be funded by proceeds from the student portfolio disposal (EUR539m) that is due to close at the end of H1, with no earnings dilution this year and low single digit accretion post completion of the Rocher refurbishment, where the complex has potential to generate c.EUR30m of annual rental income (assuming rents of EUR925/sqm). The risk we highlight, is that the deal increases leasing risk for 2027 which is when Engie are due to vacate its tower in La Defense and three flagship developments are also due to complete. Transaction overview . Preliminary agreement signed to acquire a...
Rental income stood at EUR 180.0m, up 3.6% YoY and 3.3% on a LfL basis, mainly driven by indexation (+4.2%) and rent reversion (+0.1%), partially offset by a lower LfL occupancy (-1.0%).Strong performance in Paris City offices continues, with 17% reversion achieved (+27% in Paris CBD).2025 recurrent net income guidance reiterated at EUR 6.60-6.70/share.‘Buy' rating and EUR 121.00 TP reiterated.Gecina is part of our Real Estate top pick list, and Degroof Petercam preference list.
• Rents landed at EUR 694.5m, up +4.1% YoY.• Recurrent net income was up 6.8% to EUR 474.4m or EUR 6.42 (+6.7%) on a per share basis.• Dividend proposal stands at EUR 5.45 per share up 2.8%.• ‘Buy' rating reiterated and TP lifted to EUR 121.00 from 118.00.• Gecina is part of our Real Estate top pick list, and Degroof Petercam preference list.
What happened? Gecina has reported FY24 results. Key figures are; RNI/sh +6.7% to EUR6.42, DPS +2.8% to EUR5.45 and EPRA NTA/sh -0.5% to EUR142.8, all broadly in line with cons. Earnings guidance for FY25 is EUR6.60-6.70, which implies growth of 2.8-4.4%. We currently forecast EUR6.63 vs cons. of EUR6.71. BNPP Exane View: Good set of figures with earnings marginally ahead of guidance, a return to dividend growth after 5-years and revised earnings guidance that just about meets FY25 consensus. Office capital values continue to polarise, with valuation uplifts accelerating in H2 for Paris City but declining further for Western Crescent and La Defense. Occupancy ticked down marginally in Q4 and focus will now turn to leasing risk in 2025, where the statement references continued flight to centrality of tenant demand, suggesting risk to non-Paris City expiries. We also note launch of the material Mirabeau development project in Paris City, that is scheduled for delivery in Q3-27 with a cost of EUR445m, taking total outstanding capex to EUR650m. We expect management to comment on capital allocation/funding sources on the call tomorrow but note the strong liquidity position. The stock trades at a 6.9% FFO yield and 32% discount to NTA, and we think the market reaction to the print will be positive. / OCCUPANCY: Portfolio occupancy -50bps YoY and -30bps in Q4 to 93.4%. Office portfolio occupancy -30bps in Q4 to 93.4% and residential portfolio (excl. student) -120bps in Q4 to 94.0%. Within the office portfolio, occupancy is split: 94.7% Paris City, 89.0% Western Crescent and 99.6% La Defense. GROSS RENTAL INCOME: GRI +4.1% LfL to EUR694.5m, with office +6.6% and residential +4.7%. GRI uplifts were driven by +5.2% indexation and +0.8% index beating LfL rental growth. EBITDA +5.7% to EUR565.7m, with margin +1.2% to 81.5%. RNI/sh and DPS: RNI/sh +6.7% to EUR6.42 and DPS +2.8% to EUR5.45. The dividend will be paid in cash with an interim dividend of EUR2.70 on March 5 and EUR2.75...
• Nuveen Real Estate and Global Student Accommodation (GSA) have signed a firm commitment to acquire Gecina's student housing portfolio.• The firm commitment was signed at an implied valuation of approximately EUR 567m including duties.• The potential transaction is expected to be completed in the first half of 2025.• BUY and EUR 118 TP reiterated.
We transfer coverage of Gecina and Icade to Sam King and revisit the investment case for both. We also conduct a deep dive on the Paris office market, aided by BNP Paribas Real Estate data. Separately we publish a London office sector piece here. Paris Offices - who is in control? Occupier demand is focussed on quality. That is not new. But Grade A real estate is no longer enough in Paris. Occupiers have increasing power when negotiating the terms of landlord relationships, given large parts of the market are oversupplied. Portfolio alignment to the right submarkets is therefore critical to landlords retaining occupancy and pricing tension. We assess Gecina and Icade portfolio exposures to markets in over and under supply; Gecina is well-placed, while we believe Icade will face increasing difficulties keeping vacancy under control. Gecina (+) TP EUR120 Gecina is our top European office pick. The sector is battling perception risks, where many investors question the structural outlook for demand. And rightly so. Demand is estimated to settle 20% below pre-covid levels due to WFH in Ile-de-France. But the office is not dead. And tenant demand is more focussed on quality and location than ever. Gecina will benefit from that focussing of demand, and we forecast attractive earnings growth and total returns over the following three years that compare well versus peers. We reiterate our Outperform rating. Icade (=) TP EUR26 At first glance Icade looks cheap. Big discount to NTA, double digit FFO yield and sufficient balance sheet liquidity, all against a backdrop of central banks cutting rates. What''s not to like? A few things in our view. Structural concerns on non-CBD offices, valuation declines and capital constraints. On closer inspection, the stock does not strike us as glaringly cheap. We think the ReShape strategy credible, but think negative property returns and lack of Healthcare disposals will preclude a re-rating.
GFC GFC ICAD ICAD
Rental income amounted to EUR 518.5m, up 4.4% YoY and +6.7% on a LfL basis.Offices benefited from an acceleration in LfL growth of 6.9%, with LfL growth for offices in Paris City reaching +8.4%.Management confirms that FY24 recurring EPS should be at the upper end of the range of the guidance around EUR 6.40 per share.We reiterate our positive stance on the stock, given its solid balance sheet and resilient underlying market. Buy recommendation reiterated.The company holds a conference call today at 9:00 CET.More details are in the Note published this morning
Rising above office market downturn
Results ahead of our expectations Gecina delivered strong H1 LfL rental growth across the office portfolio of +6.5% with portfolio values flat in aggregate across the wider portfolio. We had previously been expecting asset values to decline in H124 (before troughing in H224) so this stabilisation (Paris City was +2%) should be welcomed by the market. In terms of other positive surprises, Recurrent Net Income was up an impressive +8.4% in 2024 and Gecina is now focusing on future earnings growth opportunities, utilising its solid balance sheet for value accretive capex. We were slightly surprised to not see an earnings guidance upgrade, but believe there is still scope for this at the time of the Q324 results. Portfolio value stabilised We were forecasting Paris office assets to still experience notable capital value declines in both H124 and H224 and whilst there has been some pressure on secondary asset values, it appears that prime asset values have now stabilised at around the 4.0%-4.25% yield level. Going forward, as prime rents continue to grow, we could see positive capital value growth and NTAs (where we are 6% ahead of FY25 consensus) now having reached their troughs. Refocus on growth As a result of the positive outlook for further rental growth and the company seeing a stabilisation in portfolio values (and thus LTV at a sensible 35%), Gecina is committing to 2 new redevelopment projects driving EUR280m of capex and EUR30m of incremental rents. Total committed capex now stands at EUR850m, forecast to deliver c.EUR100-120m of potential new rental upside, alongside indexation. Upgrade to Outperform, TP EUR120 Gecina has underperformed YTD, down some 16% vs -3% for the wider sector. Whilst some of this underperformance is driven by French political uncertainty, we see the stock as undervalued on a 40% disc. to NTA. We retain our EUR120 TP (implying 30% upside) and upgrade to Outperform.
Rents landed at EUR 343.1m, up 6.3% YoY on a LfL.Contained portfolio valuation at +0.2% LfL vs December end, with clear polarisation between central and less central locations ongoing.Net recurrent income growth guidance reiterated to range between +5.5 to +6.5% in 2024, or ranging from EUR 6.35 to 6.40 per share as a result of solid rental performance and balance sheet control.We maintain our ‘Hold' rating and adjust our TP from EUR 116.00 to EUR 108.00 based on our relative valuation methodology and a higher WACC.The company hosts a conference call today at 10:00 CET.
Rental income stood at EUR 173.8m, up 6.2% YoY on a LfL basis, driven by accelerating indexation (+5.2%) and rental reversion captured (+1.2%).Strong performance in Paris City offices continues, with 30% reversion achieved.2022 recurrent net income per share guidance reiterated at EUR 6.35-6.40 (+5.5-6.5%).The company hosts a conference call today at 9:00 CET. Hold.
Rents stood at EUR 667m, up 6.5% YoY. On a LfL basis, the increase was 6.1%, supported by the strong LfL result for offices in particular (+6.5% YoY). Office space reversion in Paris CBD at +30%.Portfolio value stood at EUR 17.1bn, with a -10.6% LfL value adjustment recorded. Offices net cap rate up 90bps to 5.2%, residential up 30bps to 3.4%.2024 net recurrent income per share guidance at EUR 6.35-6.40 (+5.5-6.5% YoY).The company hosts a conference call today at 10:00 CET. ‘Hold' maintained.
CBD offices at a price tag
In absolute terms, revenues continued to grow in Q3 23, but organic momentum is eroding despite the continued acceleration in indexation. Prices began to adjust significantly lower in Q3 23 in Paris, including in the most expensive areas.
LfL rental income up +6.1% YoY, driven primarily by the indexation, rental reversion and occupancy rate increase. EUR 111m of additional disposals completed in Q3, with over EUR 1.1bn of assets sold to date. 2023 guidance reaffirmed at EUR 5.90 to EUR 6.00 (+6% to +8% YoY). We continue to be positive on the name, considering its solid balance sheet, strong asset rotation this year as well as solid performance of offices. 'Buy' rating reiterated.
You say deep, we say dive As concern rises for some investors surround the future demand for offices going forward, we have got out our metaphorical map of Paris'' office submarkets to impart a deeper understanding of the various different submarket dynamics, where the winning locations are and which stocks are the biggest beneficiaries on a relative basis. The findings are that Gecina should be the leader of the pack - in a notable way medium-term and followed by Covivio and Icade. ''High'' Paris CBD rents don''t scare us - nor do the tighter yields, because we take the view that stronger market rental growth will prevail, supply will remain tighter and vacancy lower. What''s the new news? The divergence in occupier demand for prime assets in prime locations, versus secondary (or even nearer-prime) assets in secondary locations is getting wider not narrower in our view. The supply disparity is also notable and we cover off specific markets such as Paris CBD, La Defense, the Northern and Southern Rings and other submarkets when analysing both the occupier and investment markets. Even when assessing the outlook for yields / capital values, we are still more positive on the central locations despite their greater yield convexity. Preference for Gecina Based on our market analysis in this report, we have a clear relative preference for Gecina over ''peers'' Icade and Covivio. In our view, the company with 85% of its office portfolio in Paris City, Neuilly or the Southern ring will deliver stronger rental growth and greater asset value resilience going forward. We are not yet calling the trough in Paris office assets values entirely, but we believe that Gecina has the greatest potential to deliver the biggest ERV-offsetting factor against further outward yield shift. For Icade, the partial healthcare portfolio exit hasn''t delivered the share price rerating that we were expecting, and we take the view that this is partially down to the slower than...
GFC GFC COV ICAD ICAD
Rents landed at EUR 332.9m, up 6.9% YoY on a LfL basis, driven primarily by indexation (+4.2%), increases in occupancy (+1.6%) as well as positive rental reversion (+1.1%). Contained portfolio devaluation at -4% LfL vs December end, with clear polarisation between central and less central locations ongoing.Net recurrent income per share guidance lifted to EUR 5.90-6.00 (EUR 5.80-5.90 previously), or +6 to +8%, as a result of solid rental performance and balance sheet control. A very strong set of results, with portfolio benefitting from both accelerating indexation figures and positive reversion in Paris City. ‘Buy' reiterated.The company hosts a conference
The nice top-line growth of 7% YoY in H1 23 was insufficient to bring the NAV growth in positive territories. The GAV was down 7% YoY, a fall last seen in 2008.
The right kind of offices
The 8% lfl performance in Offices was mostly attributable to the company’s positioning in the Paris CBD (scarce ground, inflating rents) on top of rising indexation of 4.8%. This should bode well for the Q2 and Q3 23.
Rental income stood at EUR 166.7m, up 7.3% YoY on a LfL basis, driven by accelerating indexation (+4.2%), increase in occupancy rate (+1.7%) and rental reversion captured (+1.4%). Strong performance in Paris City offices, with 31% reversion achieved.2022 recurrent net income per share guidance reiterated at EUR 5.80-5.90 (+4.3-6.1%).The company hosts a conference call today at 9:00 CET. ‘Buy' reiterated.More details in our Note published this morning
Supported by the combination of inflating indexation and lower vacancy, the lfl top line accelerated in H2 22. However, the slight yield decompression resulted in some erosion of the NAV per share yoy.
Rents stood at EUR 626m, up 2% YoY. On a LfL basis, the increase was 4.4%, supported by the strong LfL result for offices in particular (+4.6% YoY).Office space reversion in Paris CBD at +33%.Portfolio value stood at EUR 20.1bn, with a -1.6% LfL value adjustment recorded. Offices net cap rate up 30bps to 4.2%, residential up 10bps to 3.1%.2023 net recurrent income per share guidance at EUR 5.80-5.90 (+4-6% YoY).The company hosts a conference call today at 10:00 CET. ‘Buy' rating maintained.
The number of contracts nearing €1,000/sqm/year is increasing in the Paris CBD. A land shortage in central locations continues to push rents higher and favours the full transmission of inflation through indexation. The contribution from the latter should accelerate further in 2023-24.
Nothing bad occurred materially in Q2 22. Following February-July’s strong adjustment, this should help stabilise the share price or generate a bout of technical recovery.
Gecina’s pre-let pipeline coupled with rising inflation will provide the company with steady top-line growth in FY 22-24. In France, Gecina is still benefiting from tenants moving out of peripheral offices for smaller units in core locations. The high vacancy ratio outside CBD is however a forward concern.
Lfl top line was negative in Q4 21, as far as we can estimate it, coupled with vacancy rising slightly or standing at high levels. Due to further yield compression (yield of 3.1% on the full portfolio in December 2021), GAV was up 3% lfl, nevertheless. Gecina’s guidance of a positive outlook shouldn’t weigh on the share price at the end of the day.
Q3 21 was further confirmation of a polarising market: CBD experiencing nice performances whereas peripheral locations continue to loseng steam. The heart of Gecina leans on CBD.
Gecina’s H1 21 figures showed the great resilience of Paris CBD, where the bulk of its €20bn assets leans (€4bn in La Défense). End-market data don’t show a strong adjustment in either rents or price per sqm in Paris CBD, even if the same parameters are a bit more worrying at the fringe of it.
Adjusted for exceptional items, the performance of Offices was -0.7% in Q1 21. Net of the positive indexation of 0.8%, the negative 1.5% mirrored the 130bp degradation in occupancy yoy (-140bp sequentially). Gecina is highlighting an improving end-market. As far as we are concerned, we believe in a catch-up phase.
Gecina’s guidance doesn’t account a strong increase in forward vacancy nor diminishing rents. It highlighted the +2.7% in Paris CBD (Offices) and the +7% in Residential values, both in FY 20. However, Gecina’s assets were up 1% in H1 20 and down 1% in H2 20 (sequentially). Nothing worrying at pixel time.
