Covivio Hotels : 2023 half-year results

PRESS RELEASE

Paris, 18 July 2023

2023 first-half results:

Excellent first-half operating performance

Hotel market: 2022 and 2019 performances surpassed

Hotel performance in the first half of 2023 was exceptional and showed steady improvement, driven primarily by steep rises in average prices, but also since May by a return to occupancy rates close to or above their 2019 levels (down 1.9 pp in Europe and up 1.2 pp in France). The already strong domestic customer base strengthened further, while international customers increased significantly. This environment has boosted the entire hotel market, from economy to upscale segments. The latter segment also benefited from the return of business customers, with a greater number of events in the second quarter.

As a result, RevPAR has risen sharply since the start of the year, averaging 12.7% growth in Europe including 20% in May alone. Covivio Hotels' main markets significantly exceeded their 2019 performance: Italy (up 43% in May), France (up 29%) and the UK (up 17%). Germany, where the recovery has begun more recently, mainly driven by the return of business customers, posted a marked increase in performance, closing the gap with other countries in May (up 14%).

Change in hotel RevPAR in Europe1

1 Source: MKG - change in RevPAR in May 2023 vs May 2019

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Continuity of asset management work

In February 2023, Covivio Hotels signed new 15-year leases with Melia on three hotels in Spain, in Barcelona, Valencia and Malaga. Covivio Hotels will fund a €14.8 million works programme to reposition these hotels and improve their energy performance. This asset management work will generate an increase of around 30% in fixed rents and a marginal return on investment of around 9%.

In addition, a hotel in Amsterdam leased to NH Hotel Group will undergo a €10 million works programme in 2023, involving the renovation of rooms and bathrooms and the refurbishment of technical facilities. Funded by NH Hotel Group, these works are set to boost hotel performance and variable rents under the lease.

€80 million of new disposal commitments signed

Covivio Hotels signed new disposal commitments amounting to €80 million Group share (€100 million at 100%) during the first half, including seven economy class hotels in France and one hotel in Spain. These disposals were carried out at values in line with end-2022 appraisal values.

Resilient like-for-like values

At the end of June 2023, Covivio Hotels held a portfolio worth €5,998 million (€6,635 million at 100%), characterised by:

• high-qualitylocations: Booking.com location average grade of 8.8/10;
• a diversified portfolio in terms of country (12 countries, none representing more than 33% of the total portfolio) and segment (68% economy/midscale and 32% upscale);
• long-termleases with the major hotel operators: 16 operators with an average firm residual lease term of 12.6 years.

On a like-for-like basis, the hotel portfolio showed considerable resilience, with values down slightly (0.8%) over six months. This change is primarily attributable to the increase in capitalisation rates, mostly offset by revenue growth linked to the excellent performance of variable-revenue hotels and high fixed-rent indexation.

The hotel portfolio has a 5.5% average yield excluding duties.

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Hotel portfolio breakdown at 30/06/2023

Like-for-like revenue growth of 20%

The excellent first half performance by the hotel market resulted in revenue growth of 20.3% like-for-like and 23.2% as reported, with revenues totalling €150.1 million versus €121.8 million a year earlier.

Hotel lease properties (77% of hotel portfolio)

• Variable-renthotel real estate: the portfolio is leased mainly to AccorInvest (20% of the hotel portfolio) in France and Belgium and consists of economy class (Ibis) and midscale (Novotel, Mercure) hotels.
  Rents are fully indexed to revenues. As a result, this portfolio was bolstered by growth in the hotel market and posted revenues of €27.0 million, up 32.4% like-for-like over first half 2022. This increase is mainly driven by Parisian assets, the renovation of which in 2019 will allow them to capitalise fully on the rise in average prices.
• Hotels in the United Kingdom let to IHG(11% of the hotel portfolio): the nine hotels in the portfolio posted excellent performances, with like-for-like growth of 12.9%. Under the new lease signed in 2022 with IHG, variable income based on revenues applies in addition to the fixed rent.

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• Other hotel lease properties(46% of the hotel portfolio): fixed-rent hotel real estate let to B&B, NH Hotels, Motel One, Barcelo, Hotusa, etc. on long leases. Rents increased 9.0% like-for-like, mainly due to rent indexation during the first half (up 6.9% on average). Rental income was also impacted by the delivery in 2022 of the Anantara hotel in Nice (up €2 million).

The hotel residual lease term reached 12.6 years at end June 2023 while the occupancy rate remained at 100% across the portfolio.

Hotel operating properties (23% of the hotel portfolio)

Most of these hotels are located in Germany (mainly Berlin) and France. French hotels benefited from sector growth, while Germany enjoyed a favourable base effect, with the first quarter of 2022 still impacted by the health crisis.

Globally, Group share EBITDA for hotel operating properties rose by €12.0 million year-on-year, representing like-for-like growth of 53.8%.

A sound balance sheet maintained in the first half of the year

Covivio Hotels net debt (Group share) amounted to €2,390 million, compared with €2,287 million at 31 December 2022, reflecting the full impact of the cash dividend paid in the first half (€185 million). The average interest rate on debt was 2.30% (compared with 1.89% at the end of 2022). Covivio Hotels had a strengthened debt coverage ratio of 90% at end June 2023 (compared with 81% at the end of 2022), with a high hedging maturity of 6.0 years.

Average debt maturity was 3.9 years at 30 June 2023, with a comfortable Loan-to-Value (LTV) ratio of 35.9% and an Interest Coverage Ratio (ICR) of 5.24x.

Finally, Covivio Hotels reached a new milestone in aligning its financial policy with its ESG goals, by adopting a Green Financing Framework and asking its bondholders to vote to convert their bonds into Green Bonds. Covivio Hotels now holds more than €1 billion in green debt.

Covivio Hotels is graded BBB+ / Stable outlook by Standard and Poor's.

EPRA Earnings growth of 9% in H1 2023

H1 2023 EPRA Earnings were €112.1 million, up 9.3% from €102.5 million a year earlier, boosted by strong income growth fuelled by a highly buoyant hotel market. EPRA Earnings per share amounted to €0.76, up 9.3% from €0.69 the previous year.

Taking into account the fair value adjustment of interest rate hedges and fixed-rate debt, EPRA NDV (net disposal value) amounted to €3,646 million, up 2.7% from €3,763 million at 31 December 2022, or €24.6 per share.

EPRA NTA (net tangible assets) was down 0.7% year-on-year at €3,618 million, or €24.4 per share, mainly due to the May 2023 dividend payment.

EPRA NRV (net reinstatement value), at €3,999 million, was down 0.6% year-on-year by value and per share.

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2023 outlook

European hotels have emerged stronger from the Covid crisis, returning - in record time - to their pre- crisis occupancy levels and significantly raising prices to maintain profitability in a more inflationary environment. Covivio Hotels plans to take advantage of this favourable environment to continue repositioning its portfolio to improve profitability and adapt the portfolio to new client expectations.

CONTACTS

Covivio Hotels specializes in owning business premises in the hotel sector. A listed real estate investment company (SIIC), a real estate partner of the major players in the hotel industry, Covivio Hotels holds assets worth € 6.6 billion.

Covivio Hotels is rated BBB+ / Stable outlook by Standard and Poor's.

ABOUT COVIVIO

Thanks to its partnering history, its real estate expertise and its European culture, Covivio is inventing today's user experience and designing tomorrow's city.

A preferred real estate player at the European level, Covivio is close to its end users, capturing their aspirations, combining work, travel, living, and co-inventing vibrant spaces.

A benchmark in the European real estate market with €26bn in assets, Covivio offers support to companies, hotel brands and territories in their pursuit for attractiveness, transformation and responsible performance.

Build sustainable relationships and well-being, is the Covivio's Purpose who expresses its role as a responsible real estate operator to all its stakeholders: customers, shareholders and financial partners, internal teams, local authorities but also to future generations and the planet. Furthermore, its living, dynamic approach opens up exciting project and career prospects for its teams.

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