Icade SA

PAR:ICAD

Earnings Call Transcript 2021-Q3

[Operator]

Hello, and welcome to the Icade results as of September 30, 2021 Conference Call. My name is Courtney, and I'll be your coordinator for today's event. Please note that this call is being recorded. [Operator Instructions] I will now hand you over to your host, Olivier Wigniolle, Chief Executive Officer; and Victoire Aubry, Chief Financial Officer, to begin today's conference. Thank you.

[Olivier Wigniolle, MD & CEO]

So good morning, everyone. Olivier Wigniolle speaking, and thanks for joining this call this morning. So I'm going now to present our Q3 results with Victoire Aubry, our CFO. And as it was said, the presentation will be followed by a Q&A session. So in terms of context, you know that the COVID-19 crisis is more or less now behind us. It's not 100% over, but the sanitary situation is more or less stabilized in France and the situation on our market is getting back to normal. And just as an example, we have now most of the people clearly back to the office building. So day after day, the situation on our different markets is improving, and we are probably a little bit more optimistic than we were in July. So let's go to Slide 4 to start the presentation with the figures of our revenue. So total revenues for Icade for the first 9 months of the year amount to , EUR 1.224 billion increase of plus 25.2% compared to last year. And maybe more important, it's an increase of plus 20.2% compared to 2019. If you look at the revenues from our investment portfolio, they increased by plus 3.7% and they are more or less stable on a like-for-like basis. We have a significant increase of the revenues for Icade Promotion, our development subsidiary, plus 47.4%. That's for IFRS revenues. I will come back later for the economic figures and the growth is even higher. So it's clearly a strong rebound for the activity after the COVID-19 crisis. You will have your own analysis, but we do think that those figures are quite satisfying in the current post-COVID-19 environment. So if I want to comment the key highlights, I'm going now to Slide 5 for the key takeaways and Victoire will elaborate more into the detail of the different figures. I think we had a very solid business performance, occurrence our 3 different business lines. For the office portfolio, I would like to highlight 2 things. The first one is a very active asset management with more than 140,000 square meters signed or renewed during the first 9 months of the year. It represents an annualized headline rental income of more than EUR 35 million. And our gross rental income for the office portfolio were up plus 1.9% and stable like-for-like, which reflects a very resilient leasing activity. Regarding the Healthcare division, the revenues are up plus 7%, driven again by acquisition and the pan-European expansion in 2020 and also 2021. And again, Victoire will come back to that later. Also, the good news for Icade Santé is the fact that we have renewed with one of our most important tenants, Ramsay Santé. We have renewed 10 leases in France for another -- an additional 12 years, which means that we have secured EUR 38 million of headline rental income again for the next 12 years. For Icade Promotion, our development subsidiary, the business rebound is still ongoing as expected, and it's driven by a very strong demand for residential. Residential represents 85% of the total revenue and that remains very, very strong. As I said, the economic revenue stood at nearly EUR 780 million, up plus 55% compared with 2020 and up plus 31% compared with 2019. And if you look at the figures for new orders, they are also well oriented. It's plus 39% compared to last year and plus 8% compared to 2019. So again, Victoire will give you some more detail. But if you look at the asset rotation within the portfolio, we have been quite active during the first 9 months of the year. In terms of disposal for the office portfolio, we are very confident in our capacity to reach our EUR 500 million plus target of disposal for 2021 for the office portfolio at the end of September. We have already closed EUR 462 million. And the reason for that is that the appetite for core assets is still very strong in the Paris market. In terms of investment for the Healthcare division, we have invested nearly EUR 480 million, and we are fully in line with the annual target that we have for 2021, which is between EUR 450 million to EUR 500 million. It's important also to highlight that our balance sheet remained very strong, and S&P has confirmed the BBB+ rating with a stable outlook for Icade and Icade Santé. I will come back to the guidance during the conclusion. So as the first comment, we do think that the first 9 months' figures reflect I think the resilience, not to say the strength of our 3 different activities. And again, the market is now much more well oriented, and it's clearly linked with the fact that probably the sanitary crisis is more or less over. Victoire now, the floor is yours.

[Victoire Aubry, Head of Finance, IT & Work Environment]

Thank you, Olivier, and good morning, everybody. Let me now share with you the operational performance of our business lines, starting with the office property division. I'm on Slide 6. Let's talk first about the leasing activity. The top 3 figures reflect clearly the continuation of the very active asset management with a total achievement of 140,000 square meters signed or renewed since the beginning of the year. This volume achieved in a market and take up taking into account changes in demand and requirements represents an amount of annual headline rent of EUR 35 million and an average of 7 years [indiscernible] a resilient duration. And important to highlight that those new leases were signed in line with the market levels and with stable headline rental income. I want to underline also the resilient rental income of the division in the context of market slowdown in line with expectations with a total revenue at nearly EUR 285 million, up plus 1.9% compared to the same period of 2020 and stable on a like-for-like basis. By the way, the collection rate is still high at more than 80% year-to-date, [ 85% ] only for the Q3. And of Q3, reminding that our tenant base is very robust. The spot final occupancy rates stand at nearly 89%, slightly down, in line with the general slowdown in the office market that was expected in 2021 that implies also longer time need to find tenants. The KPI has clearly been mechanically impacted by tenant departures communicated in 2020 and effective this year, but also on the top of that, the disposal of the 3 leases mature assets and also the completion in Q1 of the original building 80% let impacted the top. Thanks to an ability to find strong maturity in new leases, 7 years, I remember, I just said that before, as mentioned before, the WALB is stable at 4.2 years. Second topic I would like to highlight, the development pipeline activity, a strong driver for value creation for Icade with 4 major deliveries representing more than 115,000 square meters. We are talking about Origin, the new headquarter of Technip Energies completed in Q1, and West Park completed and handed over in Q2 to Groupama after being refurbished, previously named Fontanot. Those 2 buildings representing more than 80,000 square meters located in Nanterre, a quite attractive area just behind Medipole, with exceptional up transportation and also attractive price per square meter for new tenants. The deliveries also include the Latécoère headquarter in Toulouse, completed in Q2. And the last one, the 14 square meter Fresk building located in Issy-les-Moulineaux that was delivered at the very beginning of October. Those 4 deliveries are let at a level of 80% on average and will generate owned fully-let and annual rental income of EUR 47 million and a total value creation of EUR 232 million. Last topic I want to share with you on the office segment is the asset rotation that has more than actively resumed in the beginning of the year. We managed to complete in Q3 the sale of the building Silky Way a 36,600 square meters asset located in Lyon for EUR 138 million bringing the year-to-date disposal total to EUR 462 million, disposal that were carried out under very good conditions as already announced in June, since they were made with a plus nearly 10% premium to GAV, to gross asset value as of December 2020. In terms of value had acquisition, we also completed the acquisition of Equinove for EUR 183 million. This 64,000 square meter building located in Plessis-Robinson in the suburbs of Paris, is fully led to Renault with the remaining lease term for over 4 years and an appealing cash and cash yield of 80%. In addition, there is a potential of value creation that will be unlocked through future redevelopment into a residential scheme when the tenant will leave the building. This transaction, together with the value-add acquisition of the Prairial building in Nanterre closed in June '21 for EUR 60 million, bring the total amount of Icade's office property value-add acquisitions in the beginning of the year to EUR 243 million. Going forward on Page 7, and a focus on the Healthcare division. As Olivier said, our revenue is at a strong level with a gross rental income at EUR 239 million, up nearly 7% year-on-year, slightly up on a like-for-like basis, mainly due to the index-linked rent reviews. The gross rental income was mainly fueled but the acquisition carried out in late 2020 and also beginning 2021 in France but also abroad with in Germany, I remember the acquisition of 7 nursing home from and operated by ORPEA at end of 2020. And in Italy, the acquisition of 6 nursing homes out of which 4 operated by KOS, the largest Italian operator. Occupancy rate is unchanged at 100%. Furthermore, we continue to benefit from a solid portfolio of tenants that are long-term committed with a world standing at 8 years as of September '21, up by half a year, due in particular to the lease renewals in July of 10 leases with Ramsay Santé in France for another 12 years. This renewal represents headline rent income of nearly EUR 38 million, and it is clearly a good illustration of the sound resilience of our revenues even in period of renewal. Our investment activity remained strong at the end of September with transactions totaling EUR 370 million on a year-to-date basis, including preliminary agreements, investments in France, in short, medium and long-term care represent EUR 158 million. Investment abroad represents EUR 93 million, split between Germany for EUR 46 million and Italy for EUR 47 million. Investments in the pipeline stood at EUR 61 million with EUR 50 million in France related to the delivery of 4 short-stay facilities in the beginning of the year. In the beginning of October, investment momentum continue with close to EUR 170 million of investments in France and Italy, bringing the year-to-date investment to over EUR 480 million, including EUR 290 million in France and nearly EUR 200 million abroad. This amount is in line with the annual target of EUR 450 million, EUR 500 million, as Olivier said before. All these metrics confirm once again our ability to deliver our ambition to grow in this asset class, both in France and in the European country we are focused on. Now on Slide 8 for our third business line, property development with Icade Promotion. As Olivier said previously, the business rebound is here as we expected. The growth of the economic revenue, that is to say IFRS revenues plus joint venture, is up by plus 55% compared to 2020. And this is also a growth of plus 31% compared to 2019. It is clearly driven by residential, representing close to 85% of the total revenues with [ 370 28 ] new orders for residential apartments over the period a figure up plus 39%. Those figures reflect a demand in which remains structurally high coming from both individual and institutional investors, stable at 50% and therefore, confirming their strong appetite. I also want to highlight the economic revenues for the office and public segment is once again significantly up plus 44% compared to 2020. It includes notably the sale of the Emblem complex in Lille, a 900,000 square meter office space to Macifimo and 2/3 involving Icade Investment division like the Athletes Village in Saint-Ouen-sur-Seine representing at 100% more than EUR 50 million. Now looking at leading indicators, they remain well oriented, confirming growth potential for the future. Total backlog stand at EUR 1.5 billion, up by plus 3.2% compared to December 2020, plus 5.6% only for residential, an additional potential of revenues of EUR 2.5 billion deriving from the residential portfolio comprising more than [ 11,130 ] units that we do control through option of preliminary agreements. In total, the medium-term revenue potential for Icade Promotion is close to EUR 7 billion in the 5 coming years, slightly up compared to December 2020. It represents over 19,000 units for the residential segment and more than 300 square meters for the office segment.

[Olivier Wigniolle, MD & CEO]

Thank you very much, Victoire. Now moving to Slide 9 to conclude this short presentation of our Q3 figures. Again, we do think that the figures reflect a quite solid business performance for our 3 different business lines in 2021. And again, it reflects the evolution of the different markets and reflect the evolution of the economic environment in France post COVID-19 crisis. So we are still focused on delivering our priorities for the office portfolio. The disposal plan was carried out as scheduled. We have also adapted our development pipeline, and it's still very profitable as Victoire has mentioned, but we have adapted the pipeline to the current letting market environment. And we had a strong volume of new leases and renewal during this period. And again, we do think that the kind of office building that we have in our portfolio, if you look at the value for rents and location is the appropriate combination to fit the new requirements in the post COVID-19 environment. For the Property Development division, I think clearly, we are on track to achieve the target. The implementation of the road map is well underway. Just to remind you that we plan a significant increase by the end of 2025 at EUR 1.4 billion of revenues. And again, we -- there are some changes in the market, but we follow our road map, and we do think that we will deliver the target in terms of volume and profitability. For the Healthcare Investment division, for Icade Santé, for sure, we had the growth and the international expansion with investments which are close to EUR 480 million this year. So we are, again, right on track to deliver the growth of the portfolio. For sure, the bad news of September was the fact that we had to postpone the IPO. It was mainly due to market which was not well oriented the week we have launched the IPO. For sure, it was disappointing. But I think it's important to highlight that we have reached a book close to EUR 1 billion, clearly showing the fact that the asset is really attractive, but market was not there. So we have decided to postpone the IPO and now we are considering the option that we will have in 2022. In conclusion -- the conclusion, we do confirm our guidance. Just to remind you that the guidance was increased in July. So now for 2021, the net current cash flow for Icade is expected up at plus 6%. Excluding the impact of 2021 disposal as well as the impact of the dilution deriving from the scrip dividend. So it means, at the end of the day, a plus 3% per share compared to last year, including the impact of the 2 elements I was mentioning. For the Healthcare Property division, we also confirmed the guidance at EUR 251 million. And finally, we confirm also the dividend for 2021. That will be up by plus 3%. That reflects a payout ratio of nearly 83% in terms of payout ratio. So thank you very much to have joined this call. Just to remind you that we will have our Investor Day on November 29, and it will be the opportunity for Icade to provide an update in the execution of strategic plan. And now with Victoire, we are ready to answer your questions.

[Operator]

[Operator Instructions] And our first question comes in from the line of Florent Laroche-Joubert calling from ODDO BHF.

[Florent Laroche-Joubert]

I would have 2 questions. The first one is on offices. So I have understood that you are more optimistic now in terms of leasing activity, but your occupancy rate is still in slight decrease. So would it be possible to have maybe more color on your expectation in the coming quarters regarding your occupancy rate and working options that you could have in 2022? So that would be my first question. And my second question will be on healthcare. As far as I understand, your investment for the first 9 months of the year already reached your annual target. So does that mean that you don't expect any further acquisition on investments in November and December?

[Olivier Wigniolle, MD & CEO]

Thank you, Florent, for your 2 questions. I will answer the first one and Victoire will answer the second one. Well, it is true that we are a little bit more optimistic, as I said, compared to July. I think the market is probably a little bit better. If you look at the figures provided by real estate brokers, I also do think that they are a little bit more optimistic. It's because situation is maybe not 100% normal, but it's now easy to organize -- it's very pragmatic and it's easy to organize visit of our premises. I think that now corporate are probably are now thinking maybe to not to postpone their corporate-listed project, but they are now probably the capacity to move forward. So we do see more activities on our marketing side, more visits and things like that. For sure, you still have the question of the real or the exact development of work from home with large corporates. But when we look at our portfolio, we do not see any specific move linked to the post crisis environment. For sure, development of the work from home will have on a midterm, long-term trend will have an impact on the overall volume of letting transaction on Paris area. The forecast made by the largest real estate broker is that on midterm perspective, it could be around minus 15% in terms of volume of letting transaction which will be probably -- the trend will be a little bit below 2 million square meters in the market. So we do see that in our portfolio, and we have discussion with our largest tenant. Having said that, most of them used to have an agreement with their employees for work from home before the crisis, probably they will increase. But if you look and as said by Victoire, the departure that we had in our portfolio, they were anticipated before the crisis, especially we have some departure [indiscernible] and so on. Nothing to see with the crisis. I'm not saying that the office market is booming. I said that the situation is getting back to normal. And again, we do think that for the kind of tenants we are looking for, the kind of buildings that we are putting on the market, good location, very affordable rent, in terms of CSR specification close to state of the art. I think we have released some competitive advantages to fit with the new requirements of the market. The 2 transactions that we have announced in July on Fresk and on Edenn in Nanterre, I think a good illustration of what will be the market for large corporates. They are looking for very good buildings, affordable rent and again state-of-the-art in terms of carbon footprint. And I think we have several projects that are fitting those criteria. Probably now, I was saying that we have adapted our development pipeline. If the market will be a little bit better, we have been very quick to adapt our development pipeline. But if the market will be better than we have expected 6 months or 12 months ago, we have also the capacity to put new projects on the market. We will be still -- I'm not -- I don't know if the word conservative is the appropriate word, but we are looking at exactly what is the market. We have several projects in our pipeline. We have said that we will launch less project on a speculative basis due to the current letting market environment. But if the market is better, we have the capacity to increase our pipeline. And again, no serious discussion with tenant for a major departure within the portfolio ahead of us. It doesn't mean that we will want to have the normal rotation with our tenant base, but no increasing departure within the portfolio. Victoire, on the second question?

[Victoire Aubry, Head of Finance, IT & Work Environment]

Yes, back to the investment plan we have done on the Healthcare segment. Florent, yes, regarding the figures, we have already done, just to be sure you have well understood. We have already done end of September 239 concurrently signed. And in addition, EUR 70 million on preliminary agreements, which means end of September, we have achieved a EUR 310 million of investment. And as we specified in this press release, just in October, we have signed additional preliminary agreements for [indiscernible] of EUR 170 million, which means the total is so far for this year, EUR 480 million. It's true, of course, that we have got additional projects under review, which means it could be possible we improve these figures, one more time, EUR 480 million before the end of the year. So in my point of view, EUR 480 million is a minimum total investment for 2021 year.

[Operator]

[Operator Instructions] And our next question comes in from the line of Christopher Fremantle calling from Morgan Stanley.

[Christopher Richard Fremantle, Executive Director]

This may be a question that you want to leave for your Investor Day, but I just wanted to ask you whether you are planning to be net neutral in your office investment activity. When you compare disposals on the one hand, and acquisitions and development CapEx on the other, I don't think you have mentioned how much you're spending on development CapEx as part of this release. But perhaps you could give us that clarity. The reason I ask is that the proportion of your overall portfolio in health care has been increasing over the long term. But if you are net neutral in investment on offices, the speed of the growth in proportion of health care is a bit harder to achieve. So if you could just give your broad intention there on office investment or disinvestment or net neutrality please.

[Olivier Wigniolle, MD & CEO]

Chris, thank you for your question. I'm happy to answer now and also maybe to come back to that during the Investor Day. I think where we are very clear view of what we want to do is the disposal plan for the portfolio. We have a target per year between EUR 500 million to EUR 600 million for the next 3, 4 years. It's clearly, I think what do we need to finance the new investment. It's also, I think, the good way to show market value for the type of assets that we are within our portfolio. So this figure is clearly -- maybe we could do some years a little bit more if we have interesting offers. But disposal volume of EUR 500 million to EUR 600 million per year is what we have in mind. In terms of the investment in CapEx in our development pipeline, for sure, as we said, we have said that we launched less projects on a speculative basis. It means that we will have to prelet them in order to launch new projects. And for sure, when you say that, when you do that, you have to do the pipeline to your capacity to find new tenants. So for each year, we don't know exactly how much we have to invest in terms of CapEx in our development pipeline. As I said, answering the question of Florent, maybe we will have to invest a little bit more than expected because the market is better. That's our understanding. That's what we do see on the ground. So I think maybe compared to what we had in mind in November 2020, we will invest probably a little bit more in our development pipeline for offices, but it means that we would have been able to find new tenants. Again, Eden was a very good news, the new headquarter for Schneider in Nanterre, and we could expect to have some more transactions. Where we have to be very flexible is on acquisition for office. At the end of the day, we do not plan a volume of acquisition every year. We are very flexible and opportunistic. We have announced this year EUR 243 million of acquisitions. At the beginning of the year, those 2 acquisitions were not integrated in our budget, in our plan. Again, it's because on office acquisition, we are very opportunistic. We are looking for what we do think are interesting opportunities. If you look at the 2 transactions that we have closed, 1 is they are completely different was an office building in a location that we know very well in Nanterre, very close to all our projects, Origine, Edenn, West Park and so on. And the building is fully let to the French state for the next 3, 4 years. And we know that the tenant will leave and we have already a project we developed the building. For the time being, we have underpin cash-on-cash return of 6%. We know that after redevelopment, we should target an IRR, double-digit IRR. So we like this kind of project, but it's difficult to know if you will be able to source 1, 2 or 3 during the year. The other 1 is completely different. The project that was mentioned by Victoire, Equinove in Le Plessis-Robinson. It's a project fully let to Renault, more than appealing cash-on-cash return at 8%. But the end of the story is a residential redevelopment. So we will say internally the building to Icade Promotion, and we developed one of the most important residential scheme in the Paris area. So it's difficult. It's not that I don't want to answer. My view is that probably over the next 3, 4 years, we should be net seller in office development. But if we are able and the market is providing interesting opportunities for acquisition, if we are able to find several new tenants for our development project, at the end of the day, we should be neutral or net investor, but we have also the capacity to sell more. It depends. That's the way we look at the rotation within the office portfolio. But when you look at -- if you look at the plan that we have on the table, today is probably we should be a little bit net seller over the next 3, 4 years. But again, with the market that we have around us, we have to remain very flexible and opportunistic.

[Operator]

We currently have no further questions in the queue. [Operator Instructions]

[Olivier Wigniolle, MD & CEO]

I don't know if we have one more question. Yes, we have one more. So go ahead.

[Operator]

The next question comes in from the line of Peter Watson calling from Clearance Capital.

[Peter Watson]

Just a quick question on the Healthcare division and the tenants have renewed for another 12 years with Ramsay Santé. I was just wondering whether there were any further CapEx intensive [indiscernible] on the renewal of those leases? And also if you could just comment on where the rent level was reset for those leases? That would be very helpful.

[Victoire Aubry, Head of Finance, IT & Work Environment]

Since the beginning of the year, as I mentioned before, clearly, we can see a stable [ ERV ] since the beginning. Each renewal is done with a stable condition in terms of rent per square meter to be more clear. And -- but it's true that in terms of incentive, clearly, we have seen a slight increase compared last year. It's clear that tenants are asking for, we can say, additional CapEx dedicated to improvement of the building in terms of [ CSR ] criteria and also ability to organize area with -- more in line with the new type of demand. So it's a reality. One more time if there is a stable conditions in terms of ERV, we have seen in the beginning of the year increase in incentive and especially dedicated on the CapEx, additional CapEx more than focused on free rent period. If I may, I can also come back the renewal we have done on the Healthcare division, because it's a good illustration in this asset class of the soundness of the economic model, we can say because we renewed a significant amount of renews with more than 10 leases with Ramsey Generale de Sante with exactly the same level of conditions in terms of revenues. And we just managed with Ramsey Generale de Sante a dedicated CapEx envelope for the coming years, for the coming 3 years to improve, as I said before, for offices, exactly the same thing, the same characteristics to improve the quality of the building and especially to improve the CSR component of the health care buildings. So that's what I can say so far regarding your question.

[Operator]

The next question comes in from the line of Jonathan Kownator from Goldman Sachs.

[Jonathan Sacha Kownator, Financial Analyst]

So one question for me. Can you please highlight how effectively the maybe slower demand for office in your pipeline, whether you'd be considering an acceleration of the transformation in some of the areas to other uses like residential or even would you consider in some of your more outward areas the used back of logistics for instance in [indiscernible].

[Olivier Wigniolle, MD & CEO]

So I think on our development pipeline, we have several projects. Some of them were put on hold last year due to the current market environment, especially in the north or south of Paris. At the same time, as we said, we have started discussion and negotiation with local authorities in order to transform some of our -- part of our land bank into a residential scheme. And again, negotiation with local authorities are now moving forward. So we -- I think it will be an additional flexibility to use part of our land bank for an office development or residential development. I think the situation compared to 1 year ago is probably quite different. In November 2020, for sure, due to the COVID-19 crisis, we were less optimistic in our capacity to develop some new projects. What we are seeing now 1 year after that, I don't know if it's 100% the end of the COVID-19 crisis, what is the situation in France, in the U.K. and so on. But what we do see is that some corporates are now thinking to look for a new headquarter to locate probably to decrease some of their premises and so on. So some projects that were postponed or maybe some projects that were supposed to be transformed into residential scheme, we have the capacity to be flexible. So we are not 100% sure on the fact that we will launch more projects that we have in the pipeline now. But we do see a market environment, which is more favorable. So it's not precise figures. It's not a clear example. But we have a project in Lyon, just to give you an example. The situation is quite different. If you look at regional cities, we have a project in Lyon called [indiscernible] that we will for sure launch on a speculative basis, because we do think that the market there is quite interesting. So we have no doubt, no doubt to the fact that the appropriate thing to do is to launch that on a speculative basis. In Paris area, we have launched new -- we are launching the Edenn project is pre-let at the level of 50%. But we are comfortable with the fact that 50% is not already prelet. Again, more optimistic compared to 1 year ago.

[Operator]

The final question comes in from the line of Véronique Meertens calling from Kempen.

[Veronique Meertens]

My question was actually also about the incentive. So maybe 1 last thing about it. Do you see any significant change in terms of development of incentives throughout the different areas of tariffs and maybe also in terms of market rents?

[Olivier Wigniolle, MD & CEO]

Sorry, I didn't catch your question.

[Veronique Meertens]

If you're seeing any significant changes or differences in terms of development of incentives throughout the different regions of Paris.

[Olivier Wigniolle, MD & CEO]

Yes, for sure. You have a different submarket and the situation in a submarket that we know quite well, which is not there where we have a lot of projects is even a different situation compared to La Défense, which is very close, where you are probably a risk of a supply. I think that the market on their mind in the North of Paris is probably quite well oriented. It could be for us or for other players. But the development of the Grand Paris Express is now something which is a reality, the fact the Olympic Games will be in 2024, some subway lines will be completed for 2024. South of Paris, where we have our business park in Rungis. What we do see -- you will have the new subway line completed also by 2024. So it's not for tomorrow, but it's now for 2.5 years from now. So for corporate is something that they are now taking into consideration. What we do see in Rungis is a strong demand for laboratories and what we do call activity for residential, probably less for office. So clearly, you -- when you are talking about the Paris market area, after that, you have to go into the detail, submarket-by-submarket to look and to see which kind of product is adapted. So we are very confident for offices in the West of Paris. For sure, we are not a CBD player, but the market is well oriented in the CBD of Paris. We are less optimistic when you look at the La Défense market, and the specific reason for that is that you have some projects arriving on the market. They were launched 3 years, 3.5 years ago. It's what you need to develop a new tower. So the risk of oversupply plus the fact that post COVID-19 crisis, probably a lot of people, a lot of employees of corporate are more or less reluctant to go to work into high-rise building for sanitary reasons, for the fact that with elevators, with capacity, which is divided by 2 or 3 life is [indiscernible]. La Défense will be probably a difficult market for the next 2, 3 years. Again, North of Paris is clearly a location where you have a lot of, let's say, like this, a lot of those is to a new subway line in the North of Paris, a lot of investment. I don't know, maybe we -- probably this year, it's a bit too soon to organize a visit of the Olympic Village. But if you look, we are -- as you know, we are developing a 1/3 of the Olympic Village, but around in the vicinity of the Olympic Village, clearly, the environment is changing. So again, for sure, a lot of differences submarket-by-submarket. And after that, if you are talking about regional cities, they are probably more well oriented compared to Paris area. There are absolutely no risk of oversupply. As maybe you have noticed that we have acquired a small office building in Marseilles. As I said, we will launch a speculative project in Lyon. So on regional cities, we are more -- probably even more optimistic than we are in for the Paris region. So we have to adapt to where is the demand. We have to adapt ourselves to what our clients are looking for. But again, overall, more optimistic than 1 year ago. Thank you very much for the call. If you have any additional questions, do not hesitate to send them to Anne-Sophie, Victoire or myself. And I hope we will have the pleasure to meet you physically for our Investor Day at the end of November. Have a good day. Thank you very much. Goodbye.

[Victoire Aubry, Head of Finance, IT & Work Environment]

Bye-bye.

[Operator]

Thank you for joining today's call. You may now disconnect your handset.