The Colonial Group obtained a recurring net profit of 147 million euros in the third quarter of 2024, which represents an increase of 15% compared to the same period of 2023. This increase is attributable to the growth of its revenues, which was 6% on a like-for-like basis, reaching 293 million euros. The company relates the results to a high occupancy rate and the capacity of its prime real estate offer to obtain high rents both in renovation processes and in new projects and refurbishments. In addition, Colonial has gone from a loss of 298.5 million euros in the third quarter of 2023 to a net profit of 156 million euros in the same period of 2024, representing an improvement of 454.5 million euros.
‘On the basis of a strengthened capital structure and new long-term partners, we have launched a new portfolio of projects and are ready to take advantage of new growth opportunities,’ says Juan José Brugera, Colonial's chairman.
"Our strategy in the Prime Asset class allows for high income growth, which translates into a 15% increase in recurring profit," says Pere Viñolas, CEO of Colonial, who adds that “all this within a solid capital structure, as demonstrated by the recent rating upgrade issued by Moody's”.
Recurring net income per share rose to 25.9 cents, marking a 9% increase over the previous year. This increase was attributable to rental growth in all segments, driven by the prime positioning of the portfolio and the delivery of projects and refurbishments. These included the lease of the Louvre Saint-Honoré asset to Cartier & Compagnie and the new Adidas shop at Galeries des Champs-Elysées. The management of operating costs and control of financial expenses contributed to the growth in EBITDA, with recurring net profit up 15%.
Signing activity and rents signed
Colonial closed the third quarter with outstanding contracting activity and an increase in the rents of the contracts signed. During this period, contracts totalling 112,734 square metres were signed, generating annualised revenues of 43 million euros. Of the total, 63% came from the Madrid and Barcelona markets, and 37% from Paris.
The volume of contracts was particularly high in the second and third quarters, with more than 45,000 square metres signed in each, doubling the activity of the first quarter of the year. In Madrid, 69,920 square metres were signed, of which 52,958 square metres (76%) were renovations and 16,962 square metres were new contracts. In Paris, the total signed was 16,587 sqm. In Barcelona, 26,227 square metres were signed, of which 80% (20,890 square metres) were renovations.
At the end of the year, the rents signed reflected an 8% increase in the areas re-let (release spread) and exceeded the market rents recorded at the end of 2023 by 5%, demonstrating the growth in rents for Colonial's prime properties.
Office occupancy
The Colonial Group's office occupancy reached 96%, among the highest in the sector. In Paris, occupancy reached 100%, while the Madrid portfolio reached 96% overall occupancy and 98% in the Centro de Negocios Distrito (CBD) market.
In Barcelona, most of the available space came from the recent refurbishment of areas during the third quarter in the Diagonal 197 asset, as well as in the Torre Marenostrum and Illacuna buildings, in addition to client turnover in a secondary asset in Sant Cugat. Occupancy in the Barcelona CBD portfolio also reached 96%.
Historical pipeline of projects
Colonial is concluding its current pipeline of projects, covering a total of 154,228 square metres spread across eight assets. Of these, seven have been fully delivered and leased, achieving a yield on cost of over 7%, exceeding initial expectations.
The last project in this cycle, the Madnum Urban Campus, is expected to be delivered in 2024. This complex, located south of Paseo de la Castellana in Madrid, includes more than 60,000 square metres of office and retail space. This project is expected to achieve a return of approximately 8% and generate value creation upon completion.
New project pipeline
Within the framework of the Alpha X Project, the Colonial Group has initiated a new series of projects, with a capital expenditure (capex) of 380 million euros and a deleveraged Internal Rate of Return (IRR) of over 9%. This effort will transform more than 110,000 square metres of assets in Paris, Madrid and Barcelona, generating additional annual rents of €64 million.
The Alpha X project includes the urban regeneration of four assets: a 22,000 sqm business campus in central Paris, a 24,000 sqm mixed-use complex also in central Paris, a 47,000 sqm mixed-use complex in central Madrid, and an 18,000 sqm LifeScience/Healthcare building in Barcelona's 22@ district. With these projects, the Colonial Group reinforces its long-term growth strategy, anticipating yields of over 9%.
Asset renovations
During the third quarter of 2024, the company completed the renovation of Diagonal 197, an office tower located in Barcelona, with 15,000 square metres distributed over 16 floors. It is estimated that this building will generate additional annual rents of five million euros once it is fully leased.
In addition, it is executing a renovation programme at the Haussmann - Saint Augustin asset, a prime property located in a high-demand area of Paris. This 12,000 sqm building is being renovated through a short-term plan to improve its market positioning and maximise future rents.
Capital structure and credit rating
The company reported a Loan-to-Value (LTV) of 36.5% and liquidity of 3,443 million euros. Colonial's financial situation has improved due to the transaction with CriteriaCaixa and the sale of assets, in line with its capital recycling policy, together with the favourable evolution of the business. Liquidity increased by 541 million euros, reaching a total of 3,443 million euros between available cash and unused credit lines, covering debt maturities until 2028.
Net financial debt decreased by €450 million to €4,414 million. The cost of funding remained at 1.72%, compared to 1.75% at the end of 2023, thanks to interest rate risk management. At the end of the quarter, 100% of the debt was fixed-rate and/or hedged, and the value of derivative financial instruments recorded in equity was positive €197 million.
In September, Moody's rating agency upgraded Colonial's rating to Baa1 with a stable outlook. The group also maintains a BBB+ rating from Standard & Poor's, with a stable outlook.
