Inmobiliaria Colonial SOCIMI SA

MAD:COL

Earnings Call Transcript 2021-Q3

[Operator]

Welcome to the Inmobiliaria Colonial Third Quarter 2021 Conference Call. The management will run you through the presentation, which will be followed by a Q&A session. [Operator Instructions] I'm now pleased to introduce Mr. Pedro Viñolas, CEO of Inmobiliaria Colonial.

[Pedro Viñolas Serra, Vice]

Thank you. Good afternoon. Good evening to everyone. As usual, with me, I have Carmina Ganyet, Corporate Managing Director; and Carlos Krohmer, Chief Corporate Development Officer, who are going to help me in running you through the presentation of our results for the third quarter of the year [ '21st ] . I am on Page 6 of the presentation. I would start with the headlines. The headlines should start by mentioning that for this -- by the end of this third quarter, the group net profit is EUR 184 million. Since at this time last year 2020, the result was almost nonexisting. That means that there's a huge difference between 2020 and 2021, we are increasing our profit in EUR 179 million, which are the drivers of this evolution upwards of the profit. Of course, there is one that we are not mentioning in these headlines, I am referring to the value accretion, the higher value of our properties that happened already in the -- by the end of the first half of this year. This will be driver number one. Driver number two, it's about our flow funds, about our net rental income and how does this translate into our EBITDA. Our net rental income at the end of [indiscernible] the third quarter is EUR 219 million. For us, it's very important to highlight that this means a 2.5% like-for-like. I think that this is particularly important because at this time, to understand exactly what is happening to the fundamentals of our business, it's important. As you know, we've been betting in previous months and years in to directions. Direction #1 is a flight to quality, emphasizing our strategy of investing into Prime; second, as you know, we've been investing more heavily in France than in Spain, particularly with our recent transaction regarding SFL. I think that both strategies are delivering very good yields. And as a result, this 2.5% like-for-like growth, it's at the top of comparables of our peers across Europe. So in relative terms, we believe that we are at the higher end. In terms of EPS, we are close to EUR 0.18. As you know, this is a little bit expected because we went through a relevant disposal and renovation program, which will yield the results in the near future. But as of today, that means low APS than a year ago because the assets under management are of a smaller size to that extent or in order to put this in the proper context. The comparable recurring EPS, if we take into consideration this fact, would be almost EUR 0.24, which is 9% upwards compared to previous year. So solid financial results. What is the main reason for this performance? As I said, first of all, we believe this is a strategy of flight to quality, Prime positioning; and second, tariff exposure. But anyway, I think that a third driver that we have to highlight a lot is the significant increase in letting volume as we will see now, the letting volume is accelerating, both in Spain and France, and we are showing as of today, a figure of activity, which is 71% higher than a year ago. Occupancy remains between 93% and 94%. So very healthy levels. Rental growth. Rental growth, I already mentioned the like-for-like figure is instead of using the like-for-like figure, we should talk about rental growth, comparing what are we signing with December 2020 ERVs, then we're talking about 4% growth for the Colonial Group, particularly 7% in Paris. If we talk about release spreads, that would be at 7%, particular to note 24% in Barcelona. So good numbers in terms of rental growth. As you know, recently, we've been highlighting always not only our performance in terms of quantitative or financial terms, but also in qualitative terms or more specifically about ESG, we are having additional progress on this front. And very recently, just a few days ago, it was released our GRESB rating, which right now stands at 94%, which according to Greece resources is #1 in listed office for Western Europe. And there's been also a new rating for Sustainalytics, by Sustainalytics, again, at the high end, we remain in the top 4% in real estate. And finally, in terms of balance sheet, well, maybe this is not a hot news, but just because it's part of the -- this quarter that we are today presenting in terms of results, just note to remember the successful execution of our tender offer, which led us to an increased exposure in excess of EUR 1 billion in Paris. So it was a way to buy prime properties in Paris in excess of that figure. Talking about the capital structure, we've been delivering EUR 1 billion of liability management, which has helped to improve our debt profile and our cost of financing. In particularly, there's been new debt issuance of EUR 500 million at SFL at a historical low coupon of 0.5%. And our balance sheet remains at healthy levels of LTV and more importantly, without any news -- any negative news on the rating front. On Page #7, I go a little bit more into detail. You can see, as I said, the good performance of our gross rental income and specifically even more about net rental income, which shows this 2.5% like-for-like. And our figures that I already mentioned about EPS. As you can see in this page, the performance is particularly outstanding in Paris, where the like-for-like figures show an increase year-on-year of 5.1%, which is above what's going on in Madrid and Barcelona. The same happens if instead of talking about net rental income, we talk about gross rental income. In general, what do we see is that Spain is lagging a little bit friends in terms of performance. Paris already having for our market, I have to say, which is a prime end, a very good behavior. Spain is going a little bit behind that trend. And this is what can see consistently in the figures that we are presenting today. Well, that would be the introduction. As usual, we'll go through the different sections of our presentation. I will now ask Carlos Krohmer to step in to talk a little bit about market situation.

[Carlos Krohmer, Chief Corporate Development Officer]

Thank you very much, Pere. On Page #10. Here, what you can see is a situation of the rental market. As we pointed out in previous presentations, what is important is that the Grade A availability in the market, it's extremely low. And this is important because we are seeing a clear trend of polarization in take-up. When we look at the stock, you see of the 7 million CVD stock in Paris, just 400,000 square meters are Grade A and also in Barcelona Madrid, the Grade A part of the stock is quite limited. When we then go to the availability, which is the vacancy that is in the market for this type of product. And you can see that in Paris Grade A product is nonexistent. So the availability, the vacancy as of September is 0.5%. And in Barcelona and Madrid, it's also quite low. The availability of Grade A product in the CBD of Barcelona is 2% and in the CBD of Madrid is 3.5%. When we look then at the take-up on the right-hand side, you see take-up figures for the total market because take-up is really going everywhere except for the Paris market, where we have focused on the CBD because it's such a huge market. In Paris, we see a significant increase year-on-year of the take-up, 80%. We are now at 275,000 square meters for the 9 months year-to-date. This is, as I said, 80% year-on-year increase and equally important, Paris is already at pre-COVID levels. In activity, as Pere already mentioned, and also we can see it in the macro picture of the country, Spain is a little bit lagging. And I would say a little bit slower than we expected pre-summer. However, Barcelona has seen a very significant increase in tick-up, 80% for 195,000 square meters versus 100,000, but still below the pre-COVID year. And Madrid has also seen an increase, not so high as in Barcelona, but still quite far away from pre-COVID levels. When we turn the page to Page #11, what is happening in the investment markets, extremely strong momentum in Barcelona. Year-to-date, there have been signed transactions for EUR 1.4 billion. This is the highest volume for the first 9 months in the last 14 years, and it's 24% above the year 2019 above the pre-COVID years. So extremely strong activity and 60% of the transactions are concentrated on the [ '22@ ]. In Madrid, there have been not that much transactions, but basically, this is an issue of lack of available product in the market because there's huge investor interest. When we look at the breakdown of the people that are looking at Spain, it's basically international money that's interested to invest in Spain. In Paris, we had EUR 8 billion of activity of investment volume. This is a bit lower than the previous year. But when we look at the number of transactions, it's almost at the same level than previous year. We now make a quick overview of the operating performance of our group. Then let's step to Page 13 and to start here with the letting activity. Here on the left-hand side of the page, you see in the bubbles, the letting volume of every single quarter year-to-date. And the interesting fact here is in the first 2 quarters, we had each quarter of 30,000 square meters. And now in the third quarter, we have had 60,000 square meters. So we have doubled the activity of a quarter -- of the previous quarters in the third quarter. Moreover, it is a quarter that includes the May of August that is quite in terms of activity. When we go by portfolio segment, Paris has doubled on a year-on-year basis, not a cumulative volume. Madrid also and Barcelona is 22% higher. And all of this are signing at good prices at the 7% above ERV and 4% blended release spread. Why is this happening? What is the reason behind? This is what we see on Page 14. First of all, maybe another interesting data point. What we have signed here today is 117,000 square meters also is higher than the full year number of the previous year. In the full year, we signed 97,000 square meters. And what is the reason for this strong take-up in our portfolio? For this, we can look at the characteristics of the assets where the contracts have been signed. The assets have high energy certificates, high energy levels, eco-efficiency levels. The assets are in the CBD of Paris [indiscernible] and the assets have a carbon footprint of 6-kilogram per square meter. This is extremely low figure. So here, you can see clearly a trend of polarization towards Grade A. If we look at the commercial offer in economic terms, so adding the prices signed for every contract, we have even doubled the previous year volume. On Page 15, you can see also the polarization in terms of location. Here you see with the Colonial sign where the contracts have been signed. And it's quite clear. Paris close to a [ 12 ], it's close to usually lower. In Madrid is across the Castellana and Barcelona and the Diagonal, both in the traditional part and also the '22@ part.. So you see clearly that being in this location, offering product in this location, clearly attracts demand. On Page 16, we see the form on the rental price performance as I mentioned already, 4% growth versus ERV of the beginning of the year, outstanding Paris with 7% and the release spread at 7% outstanding Barcelona with [ 24 ]. Let's step now to Page 26, where you can see the occupancy profile of our company. As Pere mentioned, we are today at an occupancy of 93%. If we compare this with the previous quarter, this is basically to the -- due to the entry into operation of some space of the Washington Plaza asset and the delivery of the federal renovation program. So really, the like-for-like portfolio has remained stable. And excluding the renovation programs that we have now in operation, the rest of the portfolio is at the level of 97%. When we go market-by-market, again, Paris, at the moment, the most stable market. It is at 95%, excluding the 2 assets that have renovation surface in operation, it is at 98%. Madrid is at 92%, but a big part of the occupancies concentrated in [ Ortega y Gasset ], excluding these 2 assets, the rest of the portfolio is at 97% and Barcelona is 92%. On the next page, looking at from the other way around in terms of vacancy. So our vacancy is 6.6% as of September. When we do a breakdown of this, we have 1.4% of the [ 6.3% ] is residual secondary exposure, so assets in secondary locations that are more difficult. 3.3% is delivery of renovation program assets that are extremely good located and we are quite confident. And the -- in a way, comparable like-for-like CBD portfolio has a vacancy below 2%.

[Carmina Ganyet I. Cirera, Corporate Managing Director]

Okay. Next section, it's about financials, and we see how the operational performance is impacted our accounts, particularly our P&L. The first financial indicator is the gross rental income. The gross rental income shows a 2% growth like-for-like, especially driven by rental prices in any single market where we are. Madrid outstanding with a growth of 3%. And Barcelona due to the fact that we have this temporary vacancy due to the fact that we have delivered some renovation program is offsetting the price effect, the positive price effect in the submarket. So [ 2 ] positive rental growth 2%. And the fact that we, as you know, and we have released in the other third quarter results, we have a negative impact of disposal. And also, we have an impact about the anticipating the renovation program. The rental growth shows a figure of EUR 234 million. So 2% like-for-like. And impacting this strategy of flying to quality to dispose of and to anticipating the renovation program. Instead of looking at the gross rental income, we look at the net rental income, the group 9 months shows an outstanding growth of 2.5% like-for-like growth, above our peers with a particular figure of 5% net rental income in Paris. So a strong performance in Paris and Madrid and Barcelona lagging, as we explained before, a little bit more the performance of Paris. If we look at the recurring earnings in the next page, you see here how has been impacted basically the disposal and the renovation program. But I would like to emphasize particularly what should have been our comparable recurring EPS in comparison to the previous year. So 9% growth about our comparable recurring with a very impact -- positive impact on the EBITDA like-for-like, with a very significant also impact on the financials, thanks to the liability management and as we explained later on, and another positive impact, thanks to the transaction, the deal we did with SFL, increasing our stake in SFL. So in comparable terms, our EPS would have been growing 9%. But again, the strategy of outloading secondary assets, flying to quality and explorating the renovation program, the recurring net profit shows a figure of EUR 92 million, which means EUR 0.18 per share, considering also that we have, as you know, according or consequently of the transaction of SFL, we have more shares in the market. So it means that even having more shares outstanding, our net profit in terms of earnings per share or the figures of: EUR 0.19. If we look at the full picture of our P&L, on Page 23, you see here the group net profit of EUR 184 million. So very capital value growth, updating the valuation in June 2021. Of course, we are confident at the end of the year when we would update our valuation that we show a very strong figures, thanks to the strength of our submarket and the good performance of our grade A assets in comparable terms to the rest of the product in the market. So the recurring earnings in comparable, as I explained, EUR 123 million But the strategy again of flying to more quality shows the figures [ 92 ] with being figures more resilient and more predictable, let's say, numbers for the future. And in terms of euros per share, considering that we have an average number of shares higher than the previous year. The EPS for this quarter results shows a figure [ EUR 18 ]-- [ EUR 17.91 ], close to EUR 0.18 per share. If we go to the liability side in the next page, you know that we have been very active improving our capital structure, our debt profile with different transactions. We went through different buybacks programs on our existing bonds. So we have been buying more than EUR 1 billion debt with a historical average cost of debt of 2%, repurchasing some maturities in 2023 and '24. And in France, in 2021 and '22. And we have also been issuing more than EUR 1 billion bonds in new on issuance with a longer maturity with a very, I would say, interesting and attractive fixed coupon below 1%. [ 0.75 ] for 8-year bonds and [ 0.05 ] for 7-year bonds. So today, the debt profile shows the figure you have in this stage. So 85% of the debt is maturing after 2025, which provides a very stable capital structure debt with an average maturity of more than 5% and with a spot interest rate of 1.4%, thanks to this liability management. So consequently, the capital structure has been improved. It shows a very, I'm on Page 25, shows a very solid levels of loan-to-value, [ 33.6% ], shows a very interesting and attractive levels of cost of debt, 1.4%. We maintain a very significant levels of liquidity of more than EUR 2 billion. And of course, we maintain our strong, I would say, outlook from our rating agencies on our rating.

[Pedro Viñolas Serra, Vice]

Thank you, Carmina. It's Pere speaking. I would like now to say a few words about our ESG performance. ESG is very important for us. I imagine it's very important for everybody else these days. In our case, as you know, we've been working hard in this matter for a long time, and we started investing a lot in a strategy of having the best certification for our assets. Now it's well known that we have the vast majority of our assets with very good ESG ratings. Well above any comparable. Then our next strategy was to improve our standards, our ratings in terms of corporate ESG performance. And here, we have been having continuous increased improvement in our ESG performance. In this particular matter, I would like to say that in terms of GRESB rating, recently, it has in published our rating for 2021. It's now -- we stand now at 94 points. That means a huge increase comparable to our rating in previous years. As you can see in this Page 27, just 3 years ago, we were 60%, 61%. Since then, we've been improving and improving this recent level of 94% means a huge increase of 56% on our starting level. And even more importantly and according to GRESB sources, that means that Colonial stands out as #1 company in Western Europe. In other words, where the GRESB average is 73% or our peer average is 79%, we stand at 94%. So I would say, very, very satisfactory levels of GRESB ratings. Even instead of talking about property, we talk about development that you can see in Page 28, our level is 97%. So again, as you can see on this page, it can hardly be better. And finally, if we talk about sustainalytics, our recent rating of 10.1 allows us to remain in the top 4% in the real estate in terms of Sustainalytics rating. So again, very satisfactory. So we have a very wide scope of strategies in order to improve in this level today that we are presenting results, I'm only maybe highlighting these results that show the improvement in our metrics. But for us, it's very important to share not only financial returns, but also nonfinancial returns having this excellent performance. Finally, our section about going forward, what is the -- our outlook for Colonial. First on Page 32. Just starting with the obvious reminder, we have more than EUR 1.2 billion invested in our project pipeline. I would like to say that, first of all, regarding these projects, there has been a little bit of delay because of the COVID experience plus recent events, regarding the delivery of supplies. And you can see here is a new set of dates that are not disruptive changes, I would say. But there is, as I say, a certain change compared to previous outlook. Having said that, I would like to highlight that there are no changes as of today in our expected cost for these investments. As you know or as we have been sharing in previous presentations, out of this EUR 1.2 billion of expected cost, the pending CapEx, it's a minor part. We're talking about EUR 300 million, roughly speaking. Moreover, I would like to highlight that the majority, an ample majority of this is already committed with construction companies. So we do not expect a lot of room for deviations in this construction cost for the pending CapEx. And on the other side, the yield on cost when we look at current market conditions, we remain at the same level. So as a consequence, we still remain confident in achieving a static potential of additional almost EUR 80 million of additional rents. Out of which, as of today, we have EUR 28 million already secured and EUR 51 million have still to be worked out. But I would say that maybe when I look at this list, today, for example, Miguel Angel 23, that would be the next one in our pipeline. It's showing very good progress, and we have very good expectations about the preletting of this. And looking at the rest, there are other where, for example, Plaza Europa with more for the future, but we also have -- also having significant progress on this. So a reasonable, I'd say, possible positive outlook about our pipeline. Besides our pipeline, we have our renovation program. We have a number of assets that are going on the renovation in excess of 100,000 square meters of GLA. In other words, around billion of GAV This is working nicely. In the case of Paris, in particular, in particular, at the time where this renovation program is not finished, we already have significant lettings in [indiscernible] Santoña in Washington Plaza and in Grenelle and also [indiscernible].So also, we remain very confident about what could be expected in terms of rents coming from this renovation program. The figure here is about EUR 44 million to EUR 46 million that should be added in the near future to our cash flows. Out of which EUR 22 million are secured to date and another EUR 22 million to EUR 24 million are remaining. So this is the second driver of value for the company in the near future. The third one is, let's say, more open to discussion is about rental growth. In Page 34, you can see the release spread captured year-to-date for different markets. And you can see the potential reversion in rents at June 21 in terms of market rent versus current passing rents, which show significant improvements across all markets. And you have seen, what is the trend, what are the returns that we are delivering so far at the end of the third quarter this year. So we remain, let's say, comfortable about the delivery of significant additional cash flows in our portfolio. We also are very positive about the fact that the SFL transaction, Page 35, has been successfully completed. And therefore, we have obtained a number of advantages of this transaction and additional exposure of around EUR 1 billion of investment in Paris Prime assets, which are the assets that everybody wants to buy, but nobody is able to buy at least at valuation levels, at the expert levels. In our case, that was what we achieved through this transaction. So we believe that we can benefit from this transaction for the foreseeing.future in very good terms. And this also highlights a little bit our view in terms of capital allocation in Page 36. You can see that after the disposals of the period 2019, 2020, we have been flagging 2021 as a point where we saw ourselves more on the investment mood then on the divestment mood. This transaction -- SFL transaction is the main one, but I think it reflects a little bit our view of the growth potential that the company has. And in Page 37, a summary of all of these. Today, we are a company that has a level of EUR 330 million. But if you add on this, what is secure project pipeline, and what we've seen from renovation programs and the rest of the project pipeline plus the small, let's say, additional estimate on what may come from the [ merchant ] price and volume. This leaves us with the capacity of adding in excess of EUR 150 million to our cash flow. That would be, let's say, our view -- house view about what can happen to our rents in the future. If we talk about our yields, Page 38 gives our traditional view, which is mainly to update you about where our valuation yields are today and how does this compare with the prime CBD market or with the bond. And as you can see in this page, the spreads remain at high standards compared to our history as a company. So we believe that the drivers for outperforming in terms of the KPIs of this company remain very strong. On Page 44, therefore, a summary of what we've seen today. First of all, we've seen, of course, results which are going upwards very significantly compared to a year ago. And where, last year, we did not show a relevant profit. Today, it's EUR 184 million. And what we highlighted is that I think that behind these numbers is -- we are experiencing the benefits of 2 strategies where the company is focusing on. One is the strategy of polarization, which means betting or investing even more heavily in our Prime product, which I think it's quite evident in the market that is delivering stronger returns than weaker kind of assets. And the second is strategy has been tactically to take advantage of friends taking off sooner is Paris Prime CBD than Spain. And this, in the end, is allowing us to -- of a 2.5% like-for-like, which, as I said, out of any colleague or competitor that we may have in Europe, this is a very top end. Behind this, the relevant driver is the increase in letting volume. But let me tell you that this letting volume is quite recent. So it's basically something that is telling you the mood of the market. But of course, the impact of this volume in our rents, 2021 is very difficult to see it because the events, the contracts that are being signed are quite recent. So this is more future potential than, of course, current impact in our P&L for this year. And this letting volume, what is telling you is Paris, if you look at the numbers, it's going back very quickly to pre-COVID levels for Prime CBD. In the case of Spain, as I said, there is a certain lag. So what we can see today is an inflection point, meaning that Madrid and Barcelona are showing stronger performance than before, but still the potential has to be developed during the next months. That would be referring to rents and cash flows if we have to refer to the investment market. I think that it's pretty obvious now that market remains very strong. All transactions that have taken place in the market, not Colonial, I'm talking in general, are taking place at premiums compared to valuation done by experts. And therefore, that, of course, sets the question of what about the gap between valuation or NAVs and stock prices. In the past, I remember 10 years ago, when there was this gap, the usual part interpretation was to say, well, the experts in, let's say, the direct market are mainly, let's say, lagging what is really happening in the market, number one; and number two, what the transactions that we see are basically fourth sales transaction when the market is basically illiquid. Well, today, this is not the case. As we all know, today, the direct market is showing huge volume by willing buyers and willing sellers. The yields are what they are. There's a lot of people wanting to invest in direct markets. And at the same time, well, we do not see this in the capital markets at the same level. Well here that we are basically in order to comment about fundamentals. What you can say is that we see a rent level strong and with good outlooks, we see also investment market having a good performance. Therefore, we are positive about our fundamentals. That's basically it for the future, I will not repeat what I just said, but we are sitting on a lot of potential to be unlocked in the future months and years. What was expected for this year, for example, Marceau has been [ delivered ] very, very successfully. So the capacity of Colonial to deliver additional cash flows remains very, very supportive for the outlook of the company. In terms of guidance, my final point, we provided, let's say, a range of potential outlook for this year. As year end is in approach, we believe that we are going to be around [ EUR 0.23 ], maybe above this -- slightly above this number, but that would be what can be said as of today. As a consequence, I think that our strategy of growth in the dividend per share will remain, and we believe that the usual path would be to grow our dividend per share number. And talking about 2022, well, maybe it's quite early because we haven't even finished 2021. Today, we would say that we are putting here a range of [ EUR 27 million to EUR 29 million ]. I think that the fact of certain delays due to COVID that are delaying certain delivery of some of our projects. We believe that we should be closer as of today to the figure of 27, that's a figure of 29, but we have a whole year to work on this and we'll see because I think that our outlook for the next month is that the market will remain in this trend of improving. Okay. So that's the summary of what we wanted to share today. As usual, we are now available for any questions that you may have for us. Thank you.

[Operator]

[Operator Instructions] The first question comes from Celine Huynh from Barclays.

[Celine Huynh, Research Analyst]

I just have one question for Carmina, please. Can you give us more color on what you meant earlier by a strong valuation results with the full year reflected our Prime portfolio? Are you expecting more yield compression, for example?

[Carmina Ganyet I. Cirera, Corporate Managing Director]

Yes. Well, I mention, I think it was -- it has been explained also by Pere in the last section. So basically, in the prices, we have 2 drivers. One driver is about rents, and we are signing the new contracts above the year be included in the price valuation in December 2020. And the other driver, of course, it's yields. And you've seen, I mean, in the appendix, you have several examples about the capital values of the transactions we have seen in the direct market. As Pere mentioned, we have disclosed also in the presentation our [ large ] supported valuation yields. And the spread between these levels and the bond market, But basically, I invite you to see in the appendix the capital values per square meters of the transactions and the capital value, the average capital value we have in our appraisals.

[Celine Huynh, Research Analyst]

All right. But you still mean that the main driver will be rent, right? Because you're charging higher rent, which means that [ exploration ] should be higher rather than yield comp?

[Carmina Ganyet I. Cirera, Corporate Managing Director]

Well, I think it's a matter of these 2 effects. So when you look at the direct markets and the yields that are transactions at these deals, and when you look at our valuation yield, this is a significant, I would say, prudency in our valuation. And always the appraisal would take the market reference when they update the appraisal.

[Operator]

[Operator Instructions] The next question comes from Fernando Abril from Alantra.

[Fernando Abril-Martorell]

I have a couple of questions, please. First is with regards to occupancy. So -- well, I have a couple of questions here. So first, it's a bit difficult to try and see what is the like-for-like occupancy changes because you are releasing projects from the pipeline and from the renovation program. So I don't know if you can give the number of the like-for-like, let's say, occupancy year-to-date? I don't know how is it evolving from your existing assets from the ones that you had at the beginning of the year. And then another one is there are still some assets to be delivered at the very end of this year, some in the pipeline, [indiscernible], Miguel Angel some in the renovation program as well. So I don't know, in view of the current circumstances that you are seeing a pickup in the letting activity and all that stuff. I don't know if you can provide any sort of guidance of the occupancy by year-end. And then a second question is just to clarify what you've mentioned, Pere, with regards to guidance. So this -- that you are looking more to the lower end of the guidance range for 2022. It's just -- it is mainly explained by a delay in the delivery of the assets because of the construction and COVID things just delay the release of the assets or is there anything else? I don't know if you can comment a bit more on this.

[Pedro Viñolas Serra, Vice]

Thank you, Fernando. Do you want -- I start by this question and then maybe Carlos or Carmina can step in about the other one. Yes, I think it's mainly about that, and I would put just one example that can easily explain, which is Biome in France. Biome has significant cash flows attached to that. It's roughly speaking, something that the market conditions should deliver around EUR 15 million to, say, the figure and this, in the end, took longer and expect that I'm talking about the most significant investment and now will be delivered by the end of first half of next year. When a year ago or years ago, we expected this to be delivered much before that is a number of millions, let's put it this way, that we don't see in 2022. But just to follow up this one, do you have any concern about the letting of this asset, we don't. We have any concern about the level of rents that we will achieve, we don't. So it's basically that sadly, this comes later, and therefore, it has an impact in the P&L of 2022, and that is just to mention, EUR 0.01 of our EPS, it's EUR 5 million. So just one or two movements of this kind of this level that explain a little bit what's happening. But the general trend for the rest, I think it's basically what I said. And Carlos, about the other 2 things.

[Carlos Krohmer, Chief Corporate Development Officer]

Yes. On the occupancy, it's basically flat on a like-for-like basis, both quarter-on-quarter and also previous year, and we tried to explain this a little bit on Page 17. Page 17, when you look at Paris, you can see that basically we are at 95%. This is quite similar to the previous year and quite similar to June. The slight decrease versus the previous quarter is entry into operation of some area in Washington Plaza. And Grenelle also came into operation during the last 12 months. So if we take out this renovation program that we are having progress on it in letting activity, we are even above a year ago. In Madrid, here, you can see it very clear. In Madrid, basically, the gap between 97% and 92% is Ortega y Gasset . So these are clearly renovation programs that we were working on. So it's clearly flat also. And Barcelona, maybe we should have highlighted here, but we were focused on the quarter-on-quarter comparison. Torre Marenostrum is an [ area ] and asset in the 22@ ad that has come a part of it into operation came already in the first quarter. So this explains basically the gap to the previous year. So in a way, the comparable like-for-like portfolio is really flat in Paris, even a bit above the previous year. And as Pere and Carmina mentioned, it's a very good product. We are quite confident and positive on it. Nevertheless, there's a little bit of lagging activity, especially in Spain, if we compare Spain with France.

[Fernando Abril-Martorell]

Just, I don't know if you can comment on what you expect by the end of the year in terms of occupancy or not?

[Pedro Viñolas Serra, Vice]

Well, we prefer not to really give the specific guidance because as we said also, we have some of the projects done coming in, and they are now coming into the first quarter. So it's a little bit difficult at this moment to assess the exact finalization point. But in any case, it would be, in a way, new entries into operations. So we are -- of the current portfolio, we are really very confident. And then we have to see to what extent we see a little bit of acceleration in the leasing market. This is what we need, especially in Spain to get a little bit more traction in the market in general.

[Fernando Abril-Martorell]

And in that sense, I don't know if you are seeing also more, let's say, number of visits on your assets to be released or not, I don't know, any figure on that? I mean you are very confident, but anything more specific that I don't know, in terms of visits or I don't know?

[Pedro Viñolas Serra, Vice]

Yes. Look, in Paris, outstanding, I would say. So in the case of if I put names like Washington Plaza or [ Cezanne ], we have interest much well in advance of the delivery of the renovation programs. So in the case of France, there are zero, not zero but not relevant headaches, let's use this language. In the case of Spain, what we are seeing is, first of all, small deals happening a lot. So when you look at the range of below 1,000 square meters or this kind of disease has rebounded. What we see is less happening in super big deals. But trying to be specific, not that you are suggesting. In the what's next in our round the corner, which is [ Miguel ] and Velazquez. [ Miguel ], we have very good prospects. We are in the typical situation that we are awaiting for things to be confirmed and nothing wrong to happen. And so we can be more specific about it, but we are pretty confident about that. Velazquez , it's coming a little bit later. So the -- I don't have a number, but visits have increased substantially, but we don't have a specific news for the last year yet. That would be a comment on the 2 things that we are working more in the short term.

[Operator]

We have no other questions. Dear speakers, the floor is yours.

[Pedro Viñolas Serra, Vice]

Thank you, and thank you for your attention, and we look forward to be able to present again very good results by the end of the year. Thank you, and have a good day. Bye-bye.