After more than a year of living with the pandemic of COVID-19, the question must be asked. What effects has the pandemic had on Colonial and how has it responded to them?
Juan José Brugera
Without a doubt, the most significant effect of the pandemic is the impact it has had on a personal level and, therefore, we would like to transmit our sincerest support to the families affected by the pandemic and those who have experienced extremely difficult times as a result. We took an immediate and proactive response to this crisis in order to protect and support our employees, clients and users, as well as the communities of Barcelona, Madrid and Paris, where the Colonial Group carries out its activities. I would also like to take this opportunity to thank and congratulate all of Colonial’s employees for their hard work during the pandemic. All teams have responded flawlessly, enabling us to maintain our highest quality standards and services for our clients and users.
Indeed, the year 2020 was marked by the management of the pandemic and by how the ensuing economic crisis has impacted our results. For us, it’s extremely satisfying to affirm that our activity has remained stable. In fact, the results at the close of 2020 reflect the strength of Colonial’s portfolio and the resilience of our business mode.
From the Management Team of Colonial, we have carried out a series of measures to strengthen the capital structure of the Group in this complex scenario. I would like to highlight that we have completed our plan for the sale of non-strategic assets, divesting more than €600m, with a double-digit premium over valuation. Likewise, we have carried out a bond issue in the amount of €1,000m, at historically low interest rates. The dividend has remained stable, in line with the previous year, and we closed 2020 with a strengthened balance sheet which presents a Loan-to-Value (LTV) below 35%, after the disposal transactions formalized in the beginning of 2021. In the operating business, the variables have remained very stable; we have signed close to 100,000 sqm with top tier clients, maintaining occupancy levels above 95% and obtaining rental prices with double-digit increases compared to the previous year. Of special mention is the management of Colonial’s commercial activity, thanks to which deferral systems have been negotiated and, in exceptional cases, allowances made for the payment of rents by companies which have found themselves in financial difficulties, although this is a very low percentage of our portfolio. Thanks to our portfolio of diversified, top quality clients, the collection rate of rents was 97% in offices.
Investors are increasingly more focused on ESG (Environmental, Social and Governance) criteria and sustainable investment in order to invest in companies. In particular, a growing importance is being placed on matters such as climate change and decarbonisation. What is the role and strategy being implemented by Colonial in this respect?
Juan José Brugera
The Colonial Group is committed to the highest international standards in the field of ESG. We pursue a clear leadership in this field, as ESG is a fundamental element of our corporate strategy, where sustainable, long-term returns are prioritised based on a business model of high-quality products. Colonial also wants to show its continued support for the United Nations Global Compact, signed in 2019, as well as the renewal of its commitment to the 10 principles concerning human rights, labour rights, the environment and the fight against corruption.” This commitment to excellence is also reflected in our governance structure. The Board of Directors is supported by the Sustainability Committee for the best development and review of our ESG strategy. In addition, we have an operational ESG Committee, composed of various members of the Management Committee, which ensures an efficient implementation of all our actions in this field.
Our efforts are visible in the results obtained in the different sustainability ratings. In the CDP rating, for example, the benchmark index to measure efforts in reducing the carbon footprint, we have obtained an A– rating, which confirms our leadership in decarbonisation. This rating far exceeds the sector average in Europe and the financial services sector and represents a strong year-on-year boost, increasing from C to A–. In GRESB we have obtained a rating of 90 out of 100, a year-on-year increase of +17%. We are also positioned at the high end of the sector in the ratings obtained by the Vigeo, Sustainalytics, MSCI and EPRA sBPR indices.
All of these positive results are due to the successful execution of our ESG Strategic Plan year after year. In particular, it is worth mentioning that in 2020 we made significant progress in our decarbonisation “Business Plan”. In 2015 we set an objective target to reduce our carbon footprint by (75%) by 2030. To date we have reached a reduction of (77%) in comparable terms, significantly advancing towards fulfilment of the plan. This progress has enabled us to accelerate the transition to the carbon neutrality of our portfolio. The asset portfolio of Colonial at 31 December 2020 reached an emission intensity ratio of 7 kgCOe2 per m² for Scopes 1 & 2, one of the lowest levels in our sector. All of our achievements in decarbonisation are based on a quality property portfolio in the city centre, with maximum energy standards. 93% of our office portfolio has the top LEED and/or BREEAM certificates.
It seems we are gradually coming out of the pandemic with growing economic activity. What are Colonial’s plans following this crisis?
Juan José Brugera
The Colonial Group will continue with its strategy focused on quality offices in the city centres of Barcelona, Madrid and Paris. During the pandemic we have seen how this type of product is the most resilient both in terms of cash flow as well as value. In addition, we mustn’t forget that we are on the cusp of a strong post-pandemic economic recovery. In growth scenarios, once again it is the prime property assets that have always and continue to capture increases in rents and value. We will continue to pursue a diversified pan-European approach, focused on quality, with a business model that has proved its robustness
As the Chairman has explained, the recent crisis has once again shown that our business model provides a clear competitive advantage in the different cycles. We believe that the office product will continue evolving towards more excellence, gaining importance in three fundamental pillars: Efficiency, Environment and Experience. The buildings must have an efficient design, with large floor spaces and high flexibility. Experience will be another important factor: the internal space with its services, the external environment (offer of services, restaurants and networking opportunities, both professional and personal) and obviously the best transport communication links in central locations. Finally, we will continue to offer properties with high levels of eco-efficiency, minimising our carbon footprint. Colonial has taken advantage of the last year to make successful disposals. Now we are preparing for a change in cycle from a solid financial structure, a new asset development program and Colonial’s traditional focus on prime offices. We will resume our acquisition program to accelerate our leadership position in offices in the Eurozone market.