Earnings call transcript: Inmobiliaria Colonial sees 6% rental income growth in Q2 2025

Inmobiliaria Colonial, a leading player in the prime office real estate market with a market capitalization of $17.87 billion, reported a robust financial performance for the second quarter of 2025. The company experienced a 6% year-on-year increase in net rental income and a 17% rise in EPRA earnings. According to InvestingPro data, the stock is trading near its 52-week high, with relatively low price volatility. Despite the positive financial results, the company’s stock showed a modest increase of 0.5%, closing at €6.13.

Key Takeaways

• Net rental income grew 6% year-on-year, highlighting strong leasing activity.
• EPRA earnings rose by 17%, with EPRA EPS reaching €0.17 for the first half of 2025.
• The company maintained a low loan-to-value ratio of 36.6%, ensuring financial stability.
• Inmobiliaria Colonial is exploring a joint venture with StoneShield, aiming for a €700 million pipeline of new assets.
• The ongoing merger with SFL is expected to complete in Q4 2025, offering growth opportunities.

Company Performance

Inmobiliaria Colonial’s performance in Q2 2025 reflects its strategic focus on prime office assets. The company reported a 6% increase in net rental income, driven by strong leasing activity, which saw a 33% increase to nearly 90,000 square meters. The occupancy rate remains robust at 95%, and rental growth outpaced inflation by 6%. The company’s gross asset value rose 4% on a like-for-like basis, while net tangible assets increased by 15% year-on-year.

Financial Highlights

• Revenue: Not explicitly disclosed, but net rental income grew 6% year-on-year.
• EPRA Earnings: Increased by 17%.
• EPRA EPS: €0.17 for the first half of 2025.
• Loan-to-value ratio: 36.6%.
• Financial costs: Low at 1.78%.

Outlook & Guidance

Inmobiliaria Colonial expects to generate €150 million in future rents from its pipeline of projects. The company is targeting EPRA EPS of €32-35 million and anticipates completing its merger with SFL in Q4 2025. InvestingPro analysts maintain a positive outlook, with price targets suggesting potential upside, though they anticipate some sales decline in the current year. The strategic focus includes human transformation projects, prime asset reversion, and science/innovation initiatives, supported by opportunistic capital recycling.

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Executive Commentary

"Our strategic positioning is based on two main pillars: focus on prime asset class and extracting maximum value," said Pera Vignolas, CEO of Inmobiliaria Colonial. Carlos Comer, Chief Corporate Development Officer, added, "We are setting the benchmark, signing at the top end of the market."

Risks and Challenges

• Economic Uncertainty: Potential macroeconomic pressures could impact office demand.
• Market Saturation: High competition in prime CBD areas may limit growth opportunities.
• Regulatory Changes: Tax optimization strategies, particularly in France, face regulatory risks.
• Supply Chain Disruptions: Could affect construction timelines and costs for new projects.
• Interest Rate Fluctuations: Changes in financial costs could impact profitability.

In summary, Inmobiliaria Colonial’s strong financial performance in Q2 2025 reflects its strategic focus on prime office assets and effective management of financial resources. With a healthy balance sheet and trading at a relatively low P/E ratio compared to its near-term earnings growth potential, the company’s forward-looking strategies and ongoing merger with SFL present significant growth opportunities, although potential risks remain.

Full transcript - Inmobiliaria Colonial SA (COL) Q2 2025:

Moderator: And gentlemen, welcome to Kolonial SFL twenty twenty five First Half Results. The management of the company will run you through the presentation that will be followed by a question and answer session. I would now like to introduce Mr. Pera Vignolas, CEO of Inmobilaria Colonial. Please sir, go ahead.

Pera Vignolas, CEO, Inmobilaria Colonial: Thank you. This is Perignola speaking. Good afternoon to everyone. Joining me today as usual is Carmina Gagnet, Chief Corporate Officer and also Carlos Comer, Chief Corporate Development Officer. I also would like to start by mentioning Samuel Santagreu, Head of Investor Relations, who usually is taking a very active part in this kind of meetings.

He’s leaving Colonial because brighter future is waiting for him and we are so sorry about him. So we would like to thank him publicly for his great job that he has been done in all of these years in Cornell and to thank him for this his contribution as you will see later on throughout the presentation. So let’s go through the presentation of the results for the first half. As usual, we like to frame, to put a framework for our results to share with you some comments about our strategic positioning. As you know, our strategic positioning is based on two main pillars.

The first pillar is our focus in prime asset class, which is delivering constantly superior growth in our cash flow generation due to its higher pricing power on the back of prime CBD. And as you can see on the Slide number four, this is generating higher and higher cash flows throughout these years and also as you will see today in the first half of twenty twenty five. And the second pillar of our activity is to extract maximum value of our prime asset class positioning also through our abilities in human transformation in delivering pipeline activities and new activities in the field of asset classes next to our office positioning, which are also contributing to our growth. Page five, where do we see current trends in our markets in 2025? First of all, office demand, which is focused on high quality space is growing.

The demand is increasing. The occupiers are expanding as confidence improve after the early twenty twenty five trade tension. This demand remains concentrated in CD basically and this is because occupiers prioritize well located Grade eight space and hence the workplace quality for job retention and attraction. So demand is increasing. Supply is not increasing.

In fact, supply is shrinking. And let me mention a couple of relevant examples. In Paris, the new urban planning known as PLUB is set to convert more than 800 assets into residential in the next few years. In Madrid, in the last year, almost 300,000 of square meters of office stock are being converted also in residential. So the balance between supply and demand where we are is going in the right direction.

And we would like also to add our initial thoughts on office employment and AI, which should also be benefiting from office employment for the impact of this trend in society. This is the general framework of our strategic positioning and that is translated in our results. And our results for the first half of this year are again quite satisfactory. I’m on Page six of our presentation and you can see here the main KPIs. Number one, related to cash flow, you can see a sustained cash flow growth.

Net rental income is growing 6% like for like year on year. The EPRA earnings are growing 17%. Our EPRA EPS is $0.17 for the first half that is on track with our guidance. Second angle of our results, operational performance outperforming very solid, rental growth 6%, 9% in Madrid as a specific quote, release spread 9% for the group, 20% in Paris, occupancy remains at 95%. Number three, after 2022, 2023 of asset repricing, 2024 of stabilization.

In this first half, we’re starting to see asset values back on the growth path. Our gross asset value is growing for the first half 4% like for like year on year that is a new gross asset value of almost billion The net tangible assets growing 15% year on year and our net tangible assets now at 9.6% as we will explain later, this is also impacted by certain exercises of pretax optimization. Including them, we are growing 1% compared to six months ago. And finally, we remain as usual with a solid capital structure, credit rating remaining at BBB plus for SMB, Baa1 for Moody’s, loan to value on 36.6%, our financial costs remaining at the low level 1.78% at the end of the first half of this year. Slide seven is a slide that we always like to share because we believe it speaks for itself.

Here in a picture, in a map, you can see where our assets are, where the location is. And as a result, you can see both the occupancy for all of the assets and then highlighting the rental growth, which is 7% in Paris in the first half, 9% in Madrid in the first half, 3% in Barcelona. And the maximum rents that we are signing now in Veritas eleven twenty five, EUR 43 per square meter per month in Madrid, EUR 30 in Barcelona. Our prime assets, as you can see, are consolidating the recovery cycle with a strong value growth after this profile of a cycle that went through a repricing in 2022 and 2023. We are coming back on track.

And transaction market is showing signs of recovery. On this Slide eight, we are sharing with you some examples of private CBD transactions that have been happening or are about to happen recently in Paris or in Barcelona at a very, let’s say normalized yields. That would be my introduction. I will come as usual at a later stage with final comments. Now I will ask Carmina to step in to share with you our financial performance.

Carmina Gagnet, Chief Corporate Officer, Inmobilaria Colonial: Thank you, Peter. In this section, Section two, as usual, we are going to cover the main financial KPIs with more detail. So the first one, gross rental income, basically growing on the back of core portfolio, 8,000,000, 4% positive growth and as well project delivery, 4% additionally, 7,000,000. These two positive impact of 8% has been mainly our compensated negative impact from Condorcet and Hausmann. As you know, the rents that or the assets, the projects that are now in the project pipeline, Haussmann is going to be delivered in the second half of this year and Condorcet will take more time.

So the losers of the rents has been overcompensated for this positive growth from the core assets and as well from the project that has been delivered during second half, especially over the last year. This fund rental income, I am in Page 11, is growing in both all markets, positively in all of the three markets, but especially highlighting Maritime Paris with 7% growth like for like from the last December 2024. As well in the building blocks, you can see how the pricing power has all our portfolios, so 2.2% above inflation that has been impacted in the first semester and as well a positive impact of 1.5% from occupancy. So pricing power again, we are repeating from the last quarters. These have pricing power above inflation from all our portfolio, impacting in this first semester of 2.2%, resulting in a very outstanding 6% like for like growth.

If we go in Page 12 about EPRA earnings, as I mentioned before, these EPRA earnings are growing on the back of a strong operation, so strong performance from the core portfolio, $10,000,000 a strong performance point in positive impact from the project deliveries and acquisition $4,000,000 And as well as you know outstanding growth of 17%, extends as well to the active debt management, price management and debt improvement of €10,000,000 positively, all of them overcompensating the negative impact and I explained before from Contoso and Hausmann being now in the project pipeline. So growth outstanding of April earnings, 17%, which is a very strong growth. And in terms of EPS, I would remind you that we have been, as you know, last year increasing the equity 16%. So we did the capital increase of 16% from €540,000,000 of shares to $6.27 As you know, to reinforce the capital structure to invest in the growth strategy in Project Alpha X. But the fact that we have been increasing 16% and the fact that this growth of 17% of EPRA earnings, we could keep the cash flow per share, the EPRA EPS per share in a positive way, so remaining at the same level, although we increased the 16% in the equity.

So we keep on track and we maintain as of today the guidance for the year end between EUR 32 and 35 per share. In Page 13, you know that every six months we update our appraisal, our assets. You can see here the appraisal being updated in June 2025 has been increased 2%, almost 2% with the rental with two positive impact. The first is the rental growth and the project delivery, 155,000,000. And the second also as well impact is slightly in compression, so some improvement in rates, 59,000,000,000.

In the appendix, you can see you will see the details of the appraisal yields, the valuation yields in every market, basically flat in Barcelona and slightly yield compression in Madrid in Paris of two, one basis points. So consequently, the like for like growth in valuation has remained year on year very positively 4%, outstanding Madrid 6%, Paris 3.3% Barcelona 4.3% in the second half of the year 2% with a very outstanding levels of Madrid of 4%. I would like to remind you and to share with you that the second half the first half of the year 2025 in Paris has been included in the appraisal, the impact of increasing transfer tax 50 basis points. So as a consequence of factoring the appraisal of these new transfer tax in Paris that has been included, approved during the first semester, the parties has remained positively being impacted being absorbed this negative impact of increasing 50 basis points on the transfer tax as well. So consequently year on year, 4% growth, valuation growing, so we see a very positive trend in our appraisal as well.

In terms of balance sheet, again, we maintain the investment grade credit metrics. So net debt $4,600,000 due to the dividend paid and the CapEx, Alpha X, still not crystallized full value from this CapEx that has been invested in the first semester will come at the delivery of the project. Loan to value, this is why the loan to value comes increased from 36% to 36.6%. Still CapEx on Alpha X to be crystallized in valuation in the future appraisals. And we maintain this rating metrics in the investment grade area, keeping as well a solid position of liquidity, covering 1.2 times the future debt maturity in the next years.

In Page 15, we have been we would like to highlight or to comment as well the commitment on continually optimizing the cash flow. As you know, on the debt side, we have been very actively preserving the solid and the competitive cost of debt, thanks to the preferred. So improving the cash flow from our company, from our shareholders. And we keep this low cost of debt in the range of 2%. But as well in the first semester, we have been optimizing the tax regime in the remaining two companies in France, Sans Souleisse ninety, Sans Souleisse and Hausmann.

They were the two subsidiaries, the only companies that still they didn’t elect for the SIC regime. And the fact that we were at the bottom of the price of December 2024, we decided to elect for the SIC regime to save the taxes for the future on the income producing of these assets. So as you know, in Paris, full election to the SEC regime, it needs to pay an exit tax that has been we have been committed to pay in four years because the law permits you to invest to pay these exit tax in the following four years, 67,000,000. In exchange of that, the benefit saving in a yearly basis between €3,400,000 per year. So this is a very accretive and interesting IRR investment.

And thanks to this election and this optimization from the TAGs in terms of as well on the EPS optimization, now the full activity of Colonial in France and in Spain, all of them are included in the regime. On the last page, in the following page, sorry, in page 16, you can see here we show probably more details than in the previous presentations how the MTA has been moved since December 2024. So the first point I would like to highlight, this is real estate valuation increases $0.21 so from $9.72 to additionally $0.21 and on top the EPRA EPS adds to the NPA $0.17 So the pre dividend NPA valuation in terms of I would say real estate valuation pre dividend results into a level of EUR10 per share from EUR9.62 to EUR10 per share. Of course, we have been paid a dividend, $0.02 9 per share, considering the treasury share, so €0.29 per share. So the consequently the MTA after the dividend paid has been increased 1% from $9.62 to $9.71.

But the fact that I explained before about the SaaS optimization, which improved the future EPS and improves the NBV, The fact that we are recognizing this exit tax to be paid in the following four years, impacts in the NPA, which is the real estate EBITDA, it’s thanks to this tax optimization impact up to €0.6 per share. This is why we would like this presentation, which has been added additional more detail to explain how has been the real estate improvement on the valuation and the fact that this optimization that will come in the future value and the future growth EPS remains a stable NPA. Consequently, the NBV improves from $9.45 to $9.54 because we don’t have any more this capital this tax capital gain on the assets that has been elected into the SIC regime. So in the future, this NDD will show no impact on the tax for these assets because all of them would be or are already under the PREP regime. Now Carlos Cromer will cover the following third section.

Carlos Comer, Chief Corporate Development Officer, Inmobilaria Colonial: Thank you very much, Carmina. Now let’s step into portfolio management. I will start with Page 18. First half has been absolutely outstanding in activity, close to 90,000 square meters, onethree more than the year before. It’s a clear proof that we are having the assets that is attracting the biggest share of demand in the market.

If we go more granular, you cannot see it here on the page and go quarter by quarter, first quarter twenty twenty five was 32,000 square meters. Second quarter has been 55,000 square meters or 22,000 square meters more, with almost doubled the activity in 2025 shows not just that we are signing a lot, but we are signing more. We are having an acceleration in our activity. And this means basically that as of today, during the first half of the year, we have signed a total activity volume of 34,000,000 that are just partly in our P and L because this is an annualized number, and we are feeding future growth. At what levels of pricing are we doing this?

At the top levels. Coloniaz assets are really setting the reference. In the pricing, you see prices in Paris well above CHF 1,000. Actually, we have signed CHF 11,000,000 of annualized rent in Paris that are on a total square meter volume of 11,000 square meters. So on average, 1,000 per square meter and quite some examples, well above EUR 1,000.

In Madrid, regulators has been signed 43 in Barcelona, 30. So we are really setting the benchmark, signing at the top end of the market. Then we have another driver that is the project activity. We have strong pricing power as a source of cash flow and then projects that we are delivering. So we have here one of our flagship projects at Matnum, which you know quite well.

It’s a total square meters of 60,000 square meters that has been delivered just recently. As of today, we are having already a strong activity and secured close to secured 40,000 square meters, 22,000 square meters signed and 18,000 square meters in very advanced negotiation or even head of terms status. So quite strong, 70% of the total premise already with secured tenants with a huge project that just has been delivered recently. What is then also important, we are signing at rents well above our initial underwriting. Once this asset is fully stabilized, this will generate a chunk of EUR 20,000,000 of rents per annum with a heat of cost in excess of 8%.

Let me talk on Page 20 about pricing power. This is one of the most distinctive elements for our prime business model as we are in a segment where there is a very scarce supply and we are providing the best product, we have the ability to deliver on a sustainable permanent basis a significant extra growth compared to the normal CPI growth. You have seen the section of Carmina that our like for like growth was 6% in rents, whereas that CPI was 2%. So we have beaten by 400 basis points the growth. Here, you see what we have signed year to date.

We have signed an ERV growth of 6% in the group. So our rents are 6% higher than the reference market rent as of December 2024, 6% just in six months. It’s not twelve months, it’s six months. And we if we compare this with the current indexation levels, the blended indexation levels of the segments where we are, we have 300 basis points in excess of the indexation that applies to the contracts in the group as of today. In Madrid, even 600 basis points.

So the main message here, our business model, our assets are delivering, are providing an extra growth between three hundred and four hundred basis points on top of inflation. Also, as a consequence, pre lease spread has been quite strong, 9%, one of the highest in the European arena, driven in particular by Paris, the 20% release spreads. On the occupancy, we are remaining, I would say, at the structural very healthy level to have enough activity in order to capture this rental growth so that we have always some space available to take the upwards trend. The rents, we are at 95%, more or less at the same level of 24%. What I would like to highlight, if we compare with the past, is that we have things that entered into operation and that were bought last year, the Alfa X portfolio.

So if we take this out from a more comparable like for like perspective, the occupancy is even a little bit higher. It’s around 97%. When we look across segments, the prime segment, where we are basically focused is strongest and then we have secondary in Barcelona. And to add, we have always said that Barcelona, we have a positive outlook. So this will gain momentum in the coming quarters.

Let me just finish this section with a little bit more forward looking view. It’s on Page 22. I already mentioned this when we look at the two biggest segments of our portfolio. What you can see is that there is a significant removal of office supply in the Paris markets, more than close to 400 assets, 700,000 square meters. This further plays in our favor, making a much better imbalance between strong demand and nonavailable supply.

You can see the playing field of Colnacado, it’s high quality assets in the city center. The availability today in Paris is 1%. And in Madrid, we have had a significant improvement of the availability in Madrid market, in France for us, but there’s nothing really available. We have today, for the total CVD, with an availability of 2.6%. If we look at the product that is a high quality product that gets the rents above 40, the availability is 0.8%.

So almost nonexistent. So we have here a quite relevant business to play. In Barcelona, it’s not here on the page, the availability of Grade A product in the city center is 1.2%, so also quite strong. A way to see also the high quality, the underlying high quality of our portfolio, if you want to get some operational KPI, an indirect way to see it is the sustainability level of our activities. We are at the top level.

And just to share here on Page 23 that we have been, again, for the third year in a row, included in a very selected narrow group across industries of climate leaders by Financial Times. So we are part of the Climate Leaders twenty twenty five Financial Times. And with this, I give over to Perra for the conclusive chapter, Chapter number four, about future.

Pera Vignolas, CEO, Inmobilaria Colonial: Thank you, Carlos. Yes, I would like to go through the last section on future growth. You know that what we are trying to accomplish as a company is the delivery of sustainable growth of cash flows based on our prime positioning in the prime CV arena and based also on our capabilities in human transformation that allow for additional value add coming from our different initiatives and projects. And in Slide ’25, you can see that at the end of this first half of twenty twenty five, We again are delivering this growth, which is now 12% CAGR starting 2022 until first half of twenty twenty five. If we look forward in the future, how this growth behavior, how this growth profile looks like, there are several layers that should be shared or discussed.

Number one, what’s coming that will be coming from the human transformation projects where we expect an impact in EPS of around $0.11 Number two, what’s coming from prime asset reversion that will deliver superior cash flow growth. We are expecting roughly speaking EUR 47,000,000 in the mid term. Number three, new initiatives in our particular case in the field of science and innovation with third party capital that should be adding additional $0.2.00 3 to the EPS. And finally what may come from our opportunistic capital recycling. These are the pillars of our future growth in our cash flow.

Going more in detail about each of them, Page 27, human transformation. As you know, we are now developing a few projects, four outstanding, two in Madrid and two in Barcelona, plus other ones, Magnum project and the last renovations, what we call the Alpha X initiative. You can see here that we will be delivering almost 90,000 square meters twenty twenty five plus more than 100,000 square meters 26,000 to 28,000. And these boats that we now have out of the water, when they go back to the water, they should be contributing with roughly speaking EUR 100,000,000 of rental income. That means an additional EPRA EPS of more than $0.11 15% of growth in our compared to 2,004 EPRA EPS.

As of today, these projects are going nicely as expected. So we are positive on their delivery for the next few years. Number two on Page 28, another driver of cash flow growth will come from the prime asset reversion. You can see here a number of examples that will generate cash flow coming from renovation programs that in the case of Paris, we’re talking about of more than 20,000 square meters. And here you can see a few examples like Louvre Saint Honore, Champs Elysees 90 or Cloud Paris.

All these could account for EUR 47,000,000 of additional gross rental income. Number three, Page 29, you know that we started this new initiative about science and innovation. Recently, we announced the final execution of our agreements in this partnership with Stochel is going quite well. We signed a transaction that included an investment of around €200,000,000 Looking at a target levered IRR of 15%, that would mean $0.02 $03 of contribution to our Eprano. On the back of investing into this vertical, we are working on a short term pipeline of €700,000,000 of new assets under management where we could be investing in the near future.

So this is another vertical of growth that is enhancing our strategy going forward. And finally, a comment on the cycle. Cycle by definition is not so easy to track or to define, but it’s clear that today we are presenting our results, some results that for the first time in the last few years are showing a positive contribution from increased asset valuation after 2022 and 2023 of repricing and 2024 of bottoming and stabilization. There are increased transaction activity that are opening for deal windows. So that generates another source of value that would show up soon in the case of prime office assets and will allow for a stronger delivery of growth for Coronial for our company.

This is basically the outlook for the next few years. Finally, let me share a quick comment on our progress on the merger between Colonial and SFL. We are on the final stages for the creation of the Spanish European platform. This the calendar has been going through the different milestones without any negative remark. As of today, at the end of the first half of twenty twenty five, The General Shareholders’ Meeting of both Colonial and SFL have already approved the merger.

As we speak, we are going through the completion of the final regulatory stages, no pending open issue as of today. Therefore, our expectation is that the merger will be finally executed and the listing of SFL will be taking place probably at the beginning of the last quarter of this year. So the Colonial SFL as a Pan European platform will start to operate in the last quarter of this year. Final comments just to wrap up on everything we shared with you today. Basically, we are happy with the results.

As you know, we’ve been on a strong delivery of cash flow growth for a few years already, a double digit year on year earnings growth has been with us for a number of years. This time, we also see asset revaluation coming along. So they are the two value drivers are becoming positive. And this cash flow growth is because ordinary course of business is going very well. You’ve seen a fantastic commercial leasing commercial activity, rental activity, huge increase compared to last year.

This is very important because these talks, they says a lot not only about the past, but also and more importantly about the future. You’ve seen that it’s not only commercial activity, it’s rental growth well above inflation with fantastic like for likes. Occupancy very strong and then a fantastic management of our debt structure, which has super reduced cost that remains with us for the last few years and for the next few years. All of this together means that we can enjoy again a fantastic first half in terms of operational activity and in other words, in terms of growth. Looking ahead, we have shared with you the different sources of growth profile that will be coming with us in the next few years, more than €150,000,000 of future rents through new pipeline under Russian and handset driven transformation growth strategy through the science and innovation initiative with third party capital and the opportunistic capital allocation that can come further.

As a final comment, we remain on track with our guidance for a strong ongoing growth. The like for like revenue growth in line with previous years, a strong EPRA EPS CAGR growth for the next few years and short term EPRA EPS to remain in the range of 32,000,000 to $35,000,000 as we’ve been disclosing recently. With this, I will end my presentation. Thank you for your attention. And now as usual, we are open to any questions or comments you may have.

Thank you.

Moderator: Ladies and gentlemen, the Q and A session starts now. Thank you. We now move on to the next question to the first question coming from Valerie Jacob. Please go ahead with your question.

Valerie Jacob, Analyst: Hello, good evening. So thank you for the presentation. I’ve got three questions, if I may. The first one is on your guidance. You’ve had a strong first quarter and your the brands you gave earlier this year is quite wide.

So I was wondering if there was a reason why you didn’t narrow the range to the top of the guidance? And if there is anything specific we should know for H2 or if you’re just being conservative? That’s my first question. My second question is on the tax optimization that you did. I’m not sure I understand because if I look at the saving versus the €67,000,000 you spent, it’s a yield of 5%.

So that doesn’t look very attractive compared to the other opportunity that you’re showing on Page 26 or investing in your own shares. So I was just wondering if you could give us some explanation of the rationale or why you think it’s the best use of this money. And my last question is on Barcelona. You’ve had some negative reversion and you still have some space to let. So I was wondering if you could give us an update on what’s going on in Barcelona.

Thank you so much.

Pera Vignolas, CEO, Inmobilaria Colonial: Thank you. I will cover question number one. Carmina will cover question number two. And Carlos will cover question number three. Now on the guidance, we prefer to remain prudent as of today.

It’s true that if you look at the results for the first half, they are pointing more at the upper end of the range of the guidance at the lower end. But as of now, we remain with a guidance of 32% to 35%. I would say that if I have to provide a comment with me more confident in the upper range than in the lower range. But with, let’s say, six months ahead, we prefer to remain this range of guidance for 2025. On the facts of innovation story, Carolina?

Carmina Gagnet, Chief Corporate Officer, Inmobilaria Colonial: Yes. On the tax, different angles. So the first one is that these companies have in the NDD recognized and as well in the balance sheet, tax capital gain, liability on the implied capital gain on those assets. What are these amount or what was this amount on the latent capital gain taxable? It was 90,000,000.

So, the way that we choose now, this is something that we monitor very closely. The way that we have choose now the election for the sick for those companies, for those assets, it’s because the valuation based or the election based on the appraisal December 2024, it was at the bottom of the level of the appraisal. So it means that now we have been a positive growth on those assets. In the future, we’ll come additional value. So the fact that we choose the right we believe that we choose the right moment.

And why we believe that is the right application of this money or this cash? Because basically, the corporate income tax attached to those assets, it was €90,000,000 and paying now €66,000,000. So we save €30,000,000 value for our shares. So we optimized 30 more than €30,000,000 and on top we have expected in a yearly basis €12,000,000 saving tax. So it’s like having an investment of a high, high double digit IRR.

This is why the rationale behind this election and this decision.

Valerie Jacob, Analyst: Thank you. That’s right. You.

Carlos Comer, Chief Corporate Development Officer, Inmobilaria Colonial: Let me take the last Just to add also some point to what Camino said. So if you take EUR 4,000,000 of running savings or EUR 5,000,000 of running savings on the money invested is a yield on this investment of 6% to 7%, at least without taking the rental growth that these assets could have. On the release spread, in Barcelona, it was EUR 1 0.7, slightly negative. This is basically that in the first half, there has been some contracts of our residual exposure in a secondary area that is Saint Gouat and 22, it’s also at the moment a little bit weaker. And therefore, there has been this negative release spread.

Also, rent in Spain had gone up much quicker than in Paris. All in all, in the prime, we are performing well. And as I said, going forward, we have a positive opinion on Barcelona, and we see the future evolution of the market with our product position there as an opportunity more than as a threat.

Valerie Jacob, Analyst: Thank you.

Moderator: Next question, Veronik Miertens. Please go ahead.

Veronik Miertens, Analyst: Hi, good evening all. Thank you very much for taking my questions and the presentation. Maybe first on the Stoneshield transaction and I appreciate you mentioned that there are over two fifty accounts that you’ve done outreach to several investors already in due diligence. But could you give slightly more color on how far you are in those process and how confident you are that you will be able to announce something before the end of the year? Because I believe in previous presentation, you did mention that you were not intending to consolidate as well.

So hoping to get some additional color here.

Pera Vignolas, CEO, Inmobilaria Colonial: Thank you, Vernique. Yes, we are working on several conversations with several investors. As of now, we are in advanced stages of discussions, meaning due diligence, work with lawyers, structuring and so on. I would say that our central scenario would be a first closing with new investors stepping in on the last quarter of this year and also on the back of certain additional pipeline opportunities that would come for the last quarter of this year. That, we don’t see anything in particular happening.

Veronik Miertens, Analyst: Okay. That’s clear. Thank you. Then you maybe mentioned capital recycling already as one of the opportunities. Obviously, we’ve seen you already made some investments, but you mentioned that the market is opening up.

I think there were also some market news articles on the Colonial potentially being in the market. Is selling lower yielding assets really more top of mind? Are there more interesting opportunities at the moment and more buyers knocking at your door?

Pera Vignolas, CEO, Inmobilaria Colonial: Yes. I think that what we can see across Europe in general is that if you if we concentrate on the prime CBD, the market is there, meaning that investors are there. What has a question mark is if the sellers are there nor the product is there. For example, as of today in Spain, I would say that it’s difficult to invest because of the lack of opportunities in Prime CVD. In our case, we may do both things.

We may be selling and buying. We are going through discussions or through a process of disposals or the first disposals in France. And also we may consider disposing tactically of some of the residential in Spain. At the same time, we are looking at investment opportunities in our local markets. So I would say that by now, we don’t have yet a clear positioning for the short term because it will depend on individual opportunities.

But certainly, we see the market more open for prime CBD both in Spain, France and across Europe in general.

Veronik Miertens, Analyst: Okay. Thank you. Maybe one follow-up because you mentioned you’re exploring in local markets. I think it was last year where you mentioned a couple of times that maybe exploring in different markets was also an option, but that’s now not really top of mind?

Pera Vignolas, CEO, Inmobilaria Colonial: No, no, it is. We remain very open to investment opportunities outside our core markets. But of course, going through the normal process of carefully assessing the investment opportunities that may be out there. So by definition, yes, we will always have a look at investment opportunities of course in France and Spain, but we do not exclude investment opportunities in other countries.

Veronik Miertens, Analyst: Okay. That’s clear. Thank you very much.

Moderator: Next question, Ana Escalante. Please go ahead.

Ana Escalante, Analyst: I have two questions. The first one is on your EPRA vacancy rate for offices that has gone up slightly due to the delivery of some of the projects. I was wondering what’s the state of that vacancy rate as of now in July? Is that taking into account some of the leasing that you’ve done in Madnum or not yet? And where do you expect that trending towards the end of the year based on your ongoing discussions with tenants?

And the second question is on the agreement of the joint venture with StoneShield. You say that you have some quite advanced discussions in terms of third party capital. Maybe if you could share, of course, with respecting the confidentiality, but what type of investors are looking at this? And also in the context of improving real estate investment markets across Europe, to what extent you think there will be appetite to do both or in terms of Paris offices and also these type of assets, whether the third party that’s looking at this is the same or there are some differences across the investors that are looking to invest in the two types of assets, let’s call it that way, the premise that you own and the assets that will fall into this joint venture?

Pera Vignolas, CEO, Inmobilaria Colonial: Yes. I will go through the second question, Ana, and then maybe Carlos can step in with your first question. Look, as of now, we are in advanced discussions with potential investors, but at the same time, still maybe too soon to provide additional color. What I could say as of today, first of all, high quality names, names that anyone know would be comfortable with. So that’s the first comment.

Second comment, this kind of investors are sharing our views on these particular adventure of our joint venture with StoneShield. So we believe that there is an opportunity for those sectors and companies operating in those sectors that have a particular profile for growth on the back of innovation and science. And also that because of this activity, this allows for a certain relationship with the landlord that goes beyond the typical real estate relationship, provides a more kind of a long term relationship with value added content and a higher stickiness, let’s put it this way. And all of these providing both higher returns and higher growth. And so as of today, I would say that the investors we are talking to are buying into this story.

It’s also the story they like. And as I said at the beginning, they’re basically good names. We expect that by the end of this year, last quarter, we will have more clarity. And by the way, the other thing that to highlight is that this is already going beyond the Spanish, let’s say borders. Spain is a fantastic place to be because it’s the highest growing economy in Europe today.

A pan European approach not to this initiative is also the strategic bet that these investors taking. But we are satisfied with where we are. Hopefully by the end of the year, we will be able to be more specific. Carlos, if you could step in on comments

Carlos Comer, Chief Corporate Development Officer, Inmobilaria Colonial: The EPIKA vacancy rate, had a little bit of movement in Madrid. Actually, are talking about in we had in March 26,600 square meters available. Now we have 27,200. So a movement of 600 square meters, a little bit more availability. So typical activity of a little bit of rotation, it’s in good assets.

Sometimes people change, and we see this more as an opportunity. On the other side, all of the head of terms and advanced negotiations that we have in Matnum are contracts that will come in the coming months and that are not part today of the occupied space. So we have already today secured a very relevant chunk of current availability. But the slight movement, the slight uptick of 600 square meters that are more over located in a very good location. We see this more as an opportunity to then be that is now at a very good level.

Ana Escalante, Analyst: Thank you. And maybe as a follow-up to the to my second question, the one that they answered. Could you please remind us what’s the expectation that you have from the investment in the joint venture with StoneShield in EPS for $27.28 I think that’s the guidance that you provided earlier?

Carmina Gagnet, Chief Corporate Officer, Inmobilaria Colonial: Anna, think, well, as we said, we have an expected EPS in the range of zero three dollars per share. But of course, it will be subject time win, pipeline, etcetera. And also the business plan, it is the expectation that it’s included as well in the growth strategy and the growth avenues that we have.

Ana Escalante, Analyst: Thank you.

Moderator: Next question, Pierre Emmanuel Clouard. Please go ahead.

Pierre Emmanuel Clouard, Analyst: Yes, good evening. Thank you for taking my questions. So I have several questions. So the first one is on France. So I see that when I’m looking at the report that has been published by SFL yesterday, the GRI is up 1% year on year, but you are saying that it’s actually down 3%.

So is there anything that we should have in mind that could explain the difference? And just to fully understand the figures, so you have a 6% like for like growth in Paris, but your JRI is down 3%. So is it fully attributable to the rent lost due to tenant vacating and assets being put into a strategic vacancy in H1? And if we can add the amount of rents it represents, it would be useful.

Pera Vignolas, CEO, Inmobilaria Colonial: Carlos, would you like to take

Carlos Comer, Chief Corporate Development Officer, Inmobilaria Colonial: I’m this not really sure if I understand clearly the question. I think it’s a very detailed technical question, and I have now not here with me the presentation yesterday. I I would suggest we can just clear this in a in a separate technical call. I don’t have here specifically the Okay.

Pierre Emmanuel Clouard, Analyst: No problem. The second one is on Barcelona. Just to understand, how can you explain a 2.3% like for like value growth when the release spread has been negative by 2% and the like for like growth actually is zero. And if I’m not mistaken, there has not been there has not been any yield compression in the city. So how can we explain the value increase?

Carlos Comer, Chief Corporate Development Officer, Inmobilaria Colonial: Because the value increase is basically what is the driver is the market rents, not the release rates. Please keep in mind also that the release rate is a very limited part of the commercial activities, only debt contracts where there have been a renewal that have been affected. And when you look in general at the ERV growth of the portfolio of Barcelona, the ERV growth year to date is 3% just in six months. So it’s a healthy growth. And then moreover, as you know, we are also progressing quite successfully with the projects.

And one of the projects is in Barcelona, and then we had here and there minor refurbs. So it’s fundamentally driven. The release spread, as I mentioned, is especially affected this first half by contracts that have been one of them in Saint Croix, another one in 2028. But it represents a super tiny part of our portfolio in the city of Barcelona. So it’s not really fully representative.

And what really counts is the yearly growth that really affects much broader part of our activity. This is the this is the reason.

Pierre Emmanuel Clouard, Analyst: Okay. And the final one is on the capital allocation. So I see that your April TV is up to 45%, today. So so can can we have in mind that the CapEx that you are planning to spend, in 2025 and 2026, in in million euros?

Carlos Comer, Chief Corporate Development Officer, Inmobilaria Colonial: So as you remind, our project pipeline has roughly CapEx deployment of $360,000,000. What we expect in terms of the project pipeline is not the project. And Mendez albarumatnum is basically finished roughly an amount of $70,000,000 of pending CapEx for 2025. We have incurred year to date 30,000,000 and, something in the range of 140 for 2026.

Pierre Emmanuel Clouard, Analyst: Okay. And if we include everything, so the refurbishment CapEx, not only the the pure pipeline projects plus SunShield. What what could be the amount of total CapEx to be spent?

Carlos Comer, Chief Corporate Development Officer, Inmobilaria Colonial: This this additional figure I have, no, not with me. I would include it together with the other question that you have on the technical part for this brief call.

Pierre Emmanuel Clouard, Analyst: Okay. Thank you very much.

Moderator: Next question, Michael Finn. Please go ahead.

Michael Finn, Analyst: Yes. Hi there. My first question is on the asset in Barcelona that was finished recently called Diagonal 197. I believe at the first quarter, it was mentioned that there may be a tenant for that building.

Fernando Avril, Analyst: And I was expecting it

Michael Finn, Analyst: to maybe be in the press today. But I’m just curious if you have any update on that. And my second question is based on the science fund. In the presentation in April, you mentioned, I believe, eight different cities. And I’m just curious which cities are currently screening as the best.

Should I assume that it is the three cities included on Page 29? So yes, any other details there, please, would be great. Thank you.

Pera Vignolas, CEO, Inmobilaria Colonial: Yes. I could not follow the second question. Maybe Carlos could answer better. On the first part, no, at this moment, we don’t have additional progress on Diagonal 197. There were certain visibility that didn’t have additional progress yet.

So still, let’s say, we are where we were. And last time, we talked about this. The second one, Carlos, maybe you can answer better.

Carlos Comer, Chief Corporate Development Officer, Inmobilaria Colonial: Sorry, the second one, I did not get it correctly. What was the second question?

Michael Finn, Analyst: Yes. The second part is out of the eight cities that were in the press back in April, I’m just curious which ones now, screen has been the best ones? Which ones do you feel will be the first target?

Carlos Comer, Chief Corporate Development Officer, Inmobilaria Colonial: First target on which?

Pera Vignolas, CEO, Inmobilaria Colonial: Yes. Well,

Carlos Comer, Chief Corporate Development Officer, Inmobilaria Colonial: I think this is very much opportunity driven at the end. We will see where the opportunities can come. This is not today not so easy to define.

Pera Vignolas, CEO, Inmobilaria Colonial: If I can add something, Carlos. As you are saying, very opportunistic, very driven by individual opportunities. If I may say something recently in our core markets, Paris and particularly in Madrid are showing super strong performance. Looking at our, let’s say, long term experience in these markets, the way we see them recently, particularly in Madrid, I would say, it’s outstanding.

Carlos Comer, Chief Corporate Development Officer, Inmobilaria Colonial: Okay. Okay.

Michael Finn, Analyst: Thank you.

Moderator: Next question, Jonathan Kownator. Please go ahead.

Pera Vignolas, CEO, Inmobilaria Colonial0: Good evening. Thanks for taking my question. One question on leasing, please. Obviously, you highlight quite a positive environment, particularly for Madrid and Paris. Beyond that, you have quite a number of letting challenges or upcoming projects to be delivered.

Can you share perhaps with us any interest already for these projects? Obviously, you’ve got the, I think, SCOR project for 2026 in Paris. Do you have already conversations on these projects?

Valerie Jacob, Analyst: Thank you.

Carlos Comer, Chief Corporate Development Officer, Inmobilaria Colonial: Well, maybe, Eda, if I start, I think the first very clear case study to this is that you’re seeing when

Ana Escalante, Analyst: you

Carlos Comer, Chief Corporate Development Officer, Inmobilaria Colonial: look at Madnum, it’s a large project, 60,000 square meters, super, super large, just has been delivered. And we are today 20,000 square meters left as a net and close to another 20,000 in very advanced conversations, so almost 40,000 square meters secured. So this is a perfect case study to show that our product really is attracting in the market. On the Project X pipeline, you know that this is a little bit more midterm in terms of delivery, more back end driven. So it’s a little bit early.

Typically, the commercial activity starts when you start to see into a little bit of look and feel. First one that will come into this situation, into this phase is scope. Scope, probably the marketing, commercial activity will start somewhere around the second half of this year, but it’s already generating quite positive momentum in the market. So we really believe that our product is attracting sufficiently and will attract strong. So we are positive.

And the first of the assets that we come close to such a phase where this starts to have activity. The other ones is later is more later in the cycle.

Pera Vignolas, CEO, Inmobilaria Colonial: Yes. If I may add something, Carlos, yes, you say, the scope is the first one. We are starting commercial activities as Carlos was saying now in the second half. We are prioritizing a multi tenant strategy for this one and we’ll have more color by the end of the year. On the other three, as you know, there’s one in Barcelona that has already the tenant in place, which is the Sanofi sorry, the Sanofi, the Sanitas I, which is already identified in Santo De Avila.

On Santa Ortensia I, the only thing that I can say is that here we are giving a higher priority to a definition of this project more on the living segment, the student housing and other kind of users. And we’ve had a huge, huge attraction or interest coming from the established operators in this segment that I believe that this site could be outstanding. And finally, in the case of Condorcet, yes, it’s long term as of today too soon to provide any additional color on this one.

Pera Vignolas, CEO, Inmobilaria Colonial0: Okay. Thank you. And just on the StoneShield project, obviously, I think you had also some leasing challenges or assets to lease there. Are you able to provide any update on that, please?

Pera Vignolas, CEO, Inmobilaria Colonial: Can you repeat, Jonathan? Because I agree, we could not follow you exactly.

Pera Vignolas, CEO, Inmobilaria Colonial0: Yes. The question was the same question the whether on the innovation assets, you were already leasing in the market and whether you had any discussions already on these assets. Obviously, I think the yield that you gave originally was a target yield where these assets would be finished. So just trying to gauge interest already for these assets. Thanks.

Carmina Gagnet, Chief Corporate Officer, Inmobilaria Colonial: Jonathan, this is Carmina. Yes, we are so we have a very interesting of both teams. We are working together in a very interesting pipeline. But based so the investment thesis, and this is the main reason that we have, and some of them, I would say, deeper conversation and some of them with some exclusivity. It’s that we stated the strategy of triple net lease strategy, long term contracts, BBB names as a corporate credit metrics with a spread between 400 bps, 300 above the risk free rate attached to this corporate rate.

What does it mean in reality is that we expect stabilized yields at 6.5%, in some cases at 7% stabilized yields with some contracts. And we state that the target of leverage ARR of 15%. So there are this kind of approach and investment opportunity that we are analyzing. And of course, we’d see if we succeed or not, but this is the investment thesis and the conversations we are having in some of the opportunities.

Pera Vignolas, CEO, Inmobilaria Colonial0: Okay. Thank you.

Pera Vignolas, CEO, Inmobilaria Colonial: I understand that there are

Michael Finn, Analyst: no Okay. More

Moderator: We have one more question. We do. We have a question from Fernando Avril. Please go ahead.

Fernando Avril, Analyst: Hello. Thank you very much for taking my questions. Two quick ones, please. So first on the renovation program in prime parties, what will be the needed CapEx for this program and also timing expectations for this plan to capture these extra rents? I don’t know if you mentioned this.

And second, a P and L question is basically the overheads line. I’ve seen it is up around 6% in H1, but it is also up 20% in the last couple of years. I don’t know if you’ve had some one offs? Or do you think this is a fair assumptions for the overheads line for the next few years? Thank you.

Carlos Comer, Chief Corporate Development Officer, Inmobilaria Colonial: I’ll take the one on the renovations. There’s always a little bit of rotation in the assets and then some renovation program opportunities. I would say, as you know from the past, these are in Paris terms, talking about Paris KPIs of spending minor activities. So minor means maybe 1,000, EUR 1,500 per square meter. Sometimes, if it’s a little bit more, it’s a little bit more.

But this is a little bit the range. It’s not like the project ex full refurbishment. They always have had a very, very interesting payoff because you then really get a significant, very significant uplift in rents that is not fully reflected here in the reversion. The reversion is the two days ERV. Typically, when you do such a renovation program, you do it to get an extra premium to convert the space in an even better one.

In terms of timing, I would say the one that will come a little bit more in the shorter term because we are benefiting from finalizing also the Cartier premises and then we’ve done some things on the entry hall. For the office part is the Louvre Building. And there, part of the things that have been done in the last quarters have been really fantastic with a significant pickup in rent. So the Louvre part is maybe the one that would come more in the shorter term in the time frame of between twelve and eighteen months, and the others will then come more progressively. But it has typically a very, very super high payoff in terms of underlying extra rents that we get compared to the marginal CapEx to be put on.

Carmina Gagnet, Chief Corporate Officer, Inmobilaria Colonial: Fernando, on the overheads, I’m not sure if I understood which kind of series of data you are looking at. But basically, the main impacts on the overheads is one shot is about what the cost or the fees and the advisory that we have been in court with the cross border merger with SFL. You know that during the last three years, we have been working with the regulator, with the tax administration, with some, let’s say, analysis as well on the independent experts as well restructuring part of organization. So this means that this is one shot cost in the overheads that it’s impacted between twenty twenty four and 2025. But the rest, it’s organic or the same level that we had in the previous years.

But it’s true that during the last years, a lot of efforts and I would say cost attached to their restructuring and reorganization and cross border measure.

Fernando Avril, Analyst: Okay. Thank you, Varina.

Moderator: There are no further questions. Therefore, I give back the floor to Mr. Pedra Vignoles. You have the floor.

Pera Vignolas, CEO, Inmobilaria Colonial: So, well, thank you all for your attention. I think that, again, we are happy to be sharing with you a nice trend in the performance of this company of Colonial SFL. Hopefully, very soon, we’ll be able to share more of this with you. So nothing more on my side. Thank you very much for your attention and have a fantastic day.

Thank you. Bye bye.

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