Colonial SFL, Socimi S. A. (COL) Earnings Call Transcript & Summary

Welcome to the Colonial Field Trip Business Update Presentation. [Operator Instructions] I'm now pleased to introduce Mr. Pere Viñolas, CEO of Inmobiliaria Colonial.

Thank you. Good afternoon to everyone. The idea for the meeting of today is to update you on the situation of the company. We just had our General Shareholders Meeting a few days ago. We have also gone through a period of lockdown of our activities in France and in Spain, which now, it's over. So we thought that it was a good opportunity to share with you where the company is today. I have with me, as usual, Carmina Ganyet, Corporate General Manager; and Carlos Krohmer, Corporate -- Chief Corporate Development Director. And the idea would be, first, I would do a very, very quick comment on the Q1 results. Then I would talk on the -- an update on COVID-19 and its impact on the company. Then I will talk a little bit about what we just presented at our General Shareholders Meeting last week, but in particular, I would refer to the nonfinancial information of the company, the ESG-related information. And finally, we'll conclude with the strategic positioning of Colonial as of today. So I'm in Page 5 of the presentation. To start with, let's remember that the results of the Q1 for Colonial, which are widely known by everybody, were extremely good. So we reported for the Q1 a 6% growth in like-for-like for gross rental income. And we reported an EPRA vacancy of 2%. I'm not going to go through the details of this because it's something that is already well-known. So I just summarized these just 2 examples of the performance of Colonial, which we believe that was outstanding. What do we know now after the presentation of results is not only that these results were very good in absolute terms, but they were also very good in relative terms to the performance of the sector. For example, in Page 6, you can see how the vacancy for Colonial compares to our peers in different countries. So there is the vacancy rate, would be close to 6% for the average year. Colonial was showing 2% vacancy. And this vacancy was so small across all our markets: Barcelona, Madrid and Paris. And well below where the market is, the benchmark in also the 3 markets, Barcelona, Madrid and Paris. And instead of talking about the vacancy, we would talk about rental growth. On Page 7, we compare our gross rental income like-for-like growth of the first quarter between Colonial and the rest of the sector. And also, we can see here that we almost double the average like-for-like growth. If the average would be 3.6%, the broad rental income like-for-like growth for Colonial was 6%. Of course, if we would use the release spread number, the figure would be even higher. But just these 2 data, to mention that now that we are providing an update of the company, the starting point, which is Q1, is extremely strong. And if I may use the word, a different word, stronger than the rest of our peers, the rest of our sector. With this starting point in mind, what has happened in Colonial during the COVID-19 period until today. Page 9 provides an outlook of what we've gone through. And we've done a lot. March was a month of immediate reaction to the crisis. So basically, it was about implementing protocols for all of our buildings to make sure that they will remain available for our clients, as safe and in good shape. At that time in March, we still ended with the disposal of 2 noncore assets with a premium. And we took some positions of protection of the cash with a postponement of a limited number of projects, the CapEx related to them. April was a month that we've indicated more to a financial profile of the company. So we increase the liquidity of the company through the signature of a EUR 200 million sustainable loan. That is on top of, roughly speaking, EUR 2 billion of available liquidity for the company. So it's well above any CapEx needs that the company may have. And in the meantime, we remain on our ordinary activity with some signature of some leasing contracts, still in very good terms. That is 10% above ERB or 50% release spread. May, we went into even more important topics. We are talking about the financing and capital structure of the company. We, first of all, finalized our conversations with the rating agencies which led to Standard & Poor's and Moody's confirming our credit rating at BBB+ and Baa2 in the case of Moody's. Again, I would like to highlight that this is good in absolute terms, but it's even better in relative terms because it's widely known that it's been quite difficult for the vast majority of companies not to have any sort of downgrade or negative outlook in their ratings. In our case, we're both confirmed. Within this framework of healthy financial structure, we issued EUR 0.5 billion of bonds through SFL. As a consequence, our liquidity went above EUR 2.5 billion. And basically, with that, we even achieved a longer maturity for our debt. And most of all, we don't have any maturity that may be uncovered until 2024 that we don't have already the cash available in the company. And in May also, we released the first quarter results that I already mentioned with this 2% vacancy rate or 6% like-for-like. June, and we are -- I'm approaching now more our current situation. June, well, first of all, we had our General Shareholders Meeting, where we confirmed, as you know, our dividend repeating exactly the same figure that we had last year which is EUR 0.20 per share. But in the meantime, going back to the ordinary course of business, we had good news. And I would refer to 2 topics. First of all, among the letting activity of the company, there was one which was outstanding, which was the preletting of Marceau to Goldman Sachs, which was very significant, and also has to do with our development pipeline and the fact that this development pipeline is being pre-let further with this kind of transaction. It was a very significant transaction that I will mention again later on. And -- but also very -- more important is from the ordinary course of business, we refer to the nonordinary course of business, which is to close the process of discussions with our clients regarding potential delays or discounts in their payments. We finalized this process. And today, what we can say is that after having gone through this process, the conversations have been finalized. And particularly in the case of Spain, which is fully closed, we can confirm that the impact on the P&L of the company will be below 2% of our gross rental income. France, it's not finished. It's almost there. It won't change this figure. So we can confirm that after having gone through the process of discussions with those clients that we had that either because they were in the retail sector or because they were small enterprises going through trouble, the discussions that we had with them have meant an impact in our P&L of 2%. So we said when we started that this could be between 2% and 6%. As of today, it's 2%. And maybe in the future, there will be additional news, which are unknown to us today that may need whatever, may mean whatever. But as of today, it's 2%. I will refer more in detail to this later on. Finally, just a few days ago, we signed the logistic disposal. It's something that we said that our central scenario was that the risk would be executed as soon as this lockdown period was over. This has been the case, and this was signed with Prologis. And Prologis has a call option for the remaining part of our portfolio, and this call option has been settled in the original terms that have been agreed last year. So this has been a little bit the outlook of what has happened so far. Going more into details, as I said, the conversations with our clients, with those clients that were in a, let's say, a unique situation because of their positioning in retail or because of their size, the conversations with these clients have happened and have been finished already. We had conversations with approximately 40% of our clients. And as I said, between the page of Spain, this is closed, and this will mean a 2% impact on an annual GRI. If we look at this in other terms, this has no -- there has not been any relevant default of payments. So we had these agreements with clients that means this level of discounts, which is 2%, in other words, EUR 7 million of rents that we do not plan to collect for the whole year. But if we look at this in terms of default on payments, the default on payments has been nonrelevant. So less than 1%, and particularly, below 0.5%. And I would like to say that this has been not the result of a general policy that we have put in place for everyone. We believe that the nature of our clients is quite strong and quite unique. So as a consequence, we prefer to have individual discussions with those clients that were in a special situation. And with those clients that were in a special situation, the discussions were, "Okay, maybe I may be happy giving you some allowance or some renegotiation of part of your contract, but in return, I would like to have an even healthier contract with extended maturities." And what we are disclosing in Page 11 is that in return of these discounts that were given or renegotiations that were given to clients, we obtained an average increase of maturities between 24 and 36 months. So let's say, on an accumulated basis, we could be talking about almost 800 additional months of rents that are now secured in our contracts or in other words, the equivalent of EUR 40 million of rents that are now part of, let's say, our expected maturities, so are not at risk, let's put it this way. So this have been the discussions regarding the extraordinary part of what we've gone through, which is the COVID crisis. If we go back, I'm on Page 12, if we go back to the ordinary part of our activity, this has been some activity. As you can see in this page is, in the pre-COVID world, we signed as a group, 13,000 square meters. Between April and May, we've signed 12,000 square meters. And you can see on the right-hand side of this, what kind of clients are we talking about? If we are talking about letting up a vacant space or we're talking about renewal, we are basically talking about a letting -- new lettings, and where this happened, in CBD, in which city. Of course, this data that you see here are clearly biased or have an important impact of the Goldman Sachs-Marceau deal. That's why you see here such a strong weight of the investment banking as a sector of letting activity or the fact that most of our activity happened in Paris and in CBD. Page 13 has to deal with this extraordinary transaction that we signed with Goldman Sachs. We're talking about more than 6,000 square meters that have been pre-let to this investment bank for their Paris headquarters. We are talking about a 12-year lease with 9 years of mandatory compliance. The specific terms of the transaction are confidential, but I think that is widely known that, that have been quite remarkable and that we are more than happy with the specific terms of this transaction. And basically, we think -- we believe that here, our client was very satisfied with the potential of this product in terms of uniqueness and in terms of flexibility in order to attract and retain talent. So we are now in a situation where still we have 1,400 square meters left available, which we are working on. And the project has to be delivered, which we expect that it will happen in 2021. Now coming back to our general activity on, let's say, at the ordinary level in this, let's say, post-COVID period. On Page 14, you can see a little bit of numbers about rental growth. I have to say that, obviously, the activity in this month has not been impressive, and we did not expect any significant maturities or negotiations during this month. But in any case, the numbers are factual numbers that you can see are the numbers that are shown in this page. And you can see that the growth in rental prices, it's around 10% for this post-COVID world. So it's even better than in the pre-COVID world. And in Page 15, you can see a number of examples of things that have been signed in Spain and in France in terms of signed rents or in terms of release spreads. And we are quite specific about each negotiation. In the case of Marceau, as I said, we cannot be so specific. But as I said, it's an excellent option -- an excellent transaction. On Page 16, just to remind us that we have also gone through the delivery of our logistics portfolio. If you remember, in August 2019, Colonial signed a disposal of its logistic portfolio. That was structured in 2 parts. Initial part that was done September last year and a second part that we expected for the first half of this year. And it was a structure as a call option that has been executed. It includes 7 assets, which mean 159,000 square meters in the first and second ring of Madrid and which are high-quality assets. The settlement of this call option, as it was initially agreed last year, has meant EUR 100 million of cash proceeds in July 2020 and another EUR 64 million will come in the last quarter of this year, once certain minor present conditions have been satisfied. In -- on Page 17, a word about capital structure. As I said at the beginning, during this period, our investment-grade rating has been confirmed for both Standard & Poor's and Moody's. On top of that, a new ESG loan was signed with top-tier international banks at a cost of 157 basis points and linked to the GRESB rating. And -- that was in Spain. And in the case of France, there was a successful issuance of bond. The issue was of EUR 500 million at a 1.5% fixed coupon 7-year maturity was widely oversubscribed, 4x, and mostly allocated in the French market. So everything that has to do with, let's say, our financial information. You know the way we approach this COVID crisis, which is about the future, we have to be extremely prudent in being specific about what may happen because it's widely unknown and has a lot of uncertainty attached to that. So basically, we'll be, as we have always have been, quite prudent in how we approach this. A different story is to talk about what is happening, about what is happening without being, let's say, overly optimistic or, let's say, too emotional about it. We only want to share the actual data of what happened with you and the actual reality of the transactions or things that have happened to us. Page 19 has to do with the nonfinancial part of what we do. In previous presentations, maybe we referred more about the financial side of what we do. In this part of our presentation, we would like to talk a little bit about our nonfinancial performance in terms of ESG. So a few words about this. In this year, we have increased, as you can see in Page 19, even more the quality of our portfolio in terms of sustainability. So as you can see, we've increased by 29% in 2 years the size of the portfolio that it has either LEED or a BREEAM certificate. As of today, we have 92% after finishing last year of buildings that have LEED or BREEAM certificates with a breakdown that you can see at the bottom of this page. So we remain committed to this strategy of having more and more of our assets with a high standard of certification in terms of ESG. A different story is that on top of that, we received an award for responsible real estate investment. We were #1 in the large portfolio category of the award that was given by GRESB BREEAM, as I said, because of the quality of our overall portfolio. And not only do we work on the assets of our balance sheet in terms of ESG, we also work on the capital structure, and we have been doing some work in the field of green financing, and we have done more than EUR 350 million of ESG loans. One loan was formalized with a margin linked to aggressive rating with BNP Paribas, Natixis, CaixaBank, and BBVA. And another one, another sustainable loan was executed for EUR 151 million with ING and CaixaBank. So also doing things at the capital structure level. On Page 20, coming back to the sustainability of our assets and trying to be more specific, we want to share with you a little bit of our KPIs in terms of eco-efficiency. So you can see here that during last year, we increased from 32 to 58 our green procurement. We reduced 4% our energy consumption. We reduced 8% our water consumption, and we increased from 50% to 83% our recycled and recovered waste, all of these in like-for-like terms. Here, you have to be quite correct in the way you present numbers. These can be summarized, Page 21, looking at our carbon emissions. And our carbon emissions for the Colonial Group, what they are telling us is that we ended 2019 with 8 kilos of CO -- the equivalent of CO2 per square meter, which is an extremely low number, which is down 70% compared to what would be our base year, which is 2015, or will be down 59% to the year before, which is 2018. So if carbon emission is a summary of everything that we do in sustainability, the numbers in absolute and relative terms were quite good. And to put this in the right framework, also Colonial aligned its sustainability policy in terms of decarbonization with the Treaty of Paris, the Paris Agreement, and we have committed to be carbon neutral as of 2050 and to reduce our carbon footprint by 75 until 2030. On Page 22, you can see a little bit the numbers in terms of tons of CO2 -- of equivalent CO2. And you can see the numbers for our different markets, Barcelona, Madrid and Paris, all of them with a very good performance. In this field of sustainability, finally, I would like to mention that we just recently announced just a couple of days ago a deal that we just signed in Spain, which is a joint venture to produce -- to deliver the first wood office building in Spain. It's a small premise of 2,500 square meters above ground, which a very good location in the 22@ area of Barcelona and is done through a JV partnership with the Family Office of Barcelona, which is clearly focused on this area of sustainability and development of new projects related to wood. For us, this a small transaction. It's not only a real estate transaction. It's also, for us, our lab, where we are going to work with all of our policies that have to do with reduction of carbon emissions, but also waste reduction and everything that has to do with heat and conditioning of the building. So this is going to be the beginning of some specific projects that we will do in this field of sustainable buildings. And on Page 24, you can have a little bit more of details about this building. It's located in an excellent place of the 22@ neighborhood in Barcelona, but you know that it's been maybe the most successful market in the last 2 years. And it's pretty well surrounded of the best multinational companies and also the flex initiative that are available in Barcelona. In Page 25, you can see the details of this building. And I have to say that one of its beauties is that it's not just a project that we are starting from the scratch now, but it's a project that had already started and has all of the planning process already done, all of the execution planning already prepared. So now it's the building construction, which will start immediately. So that's the good news. Finally, to finalize this presentation, a word a little bit on our strategic positioning, which, as usual, are no great news. We remain committed -- I'm in Page 27, to our strategy of being a super core CBD portfolio. We said many times that we believe in this, not only from the point of view of returns for shareholders, which is quite proven. I was reading some research yesterday additionally on this that was an -- that went public yesterday, looking at the historical performance of CBD compared to secondary kind of assets. It's not only obvious that return -- it's better because the dynamics of supply and demand are much better. But in terms of risk profile, I think it's unbeatable, and it's also proven that if a market becomes more complicated, it's quite more resilient. And I could add that in terms of sustainability, if you have the right approach to sustainability, including all kind of scopes, you are pretty much better positioned in terms -- in order to deliver what you are expected to deliver in terms of sustainability. The CBD markets have remained quite strong in the last 2 months. Page 29 has to do with transactions that have happened in this last 2 months, and we provide some data on what's available in the market. And that's the current status. If we look about what we have in front of us until the end of the year, until the future, on Page 30, we have included a breakdown of our maturities to provide some visibility on this. Here, what you can see is talking about the maturities that the company has as of today. You can see the breakdown of this equivalent in terms of GRI of how much is already signed or the break option has not been executed, which will be the equivalent of EUR 18 million, which are on the negotiation. And we expect retention because of the nature of our conversations, which would be EUR 27 million, and which would be the remaining maturities to be managed, which are the equivalent of EUR 27 million, which would be, let's say, the area of focus of our leasing teams. And I would like to clarify that out of this EUR 27 million, the proportion, the share of the part that -- of this that is having an impact in the -- this year, 2020, it's only EUR 5 million. So we remain confident about the profile of our maturities and the way that we are managing them. Another way of looking at the future is to talk about the reversion potential that we have. On Page 31, we've just shown as of today, the release spread that has been captured in the first quarter and in the post COVID world. And the potential -- the price potential reversion that in theory, we have based on the current data available. Also talking about the future, Page 32, let's not forget that a part of our portfolio, it's our pipeline. You know our main guidelines. We are a company that has around EUR 12 billion under management, and around 10% of this is our development pipeline. Let's remember that this EUR 1.2 billion, it's a figure that includes the acquisition cost, the CapEx that has already been deployed and the CapEx that has already -- that it's not already deployed. So in terms of cash needs, it's not very relevant for the overall profile of the company. And concerning this pipeline, because of the transaction of Marceau that I've been mentioning before, now what we can say is that we have improved the pre-letting of our portfolio from 25% to 33%. If -- another way of looking at this, which may be relevant these days, imagine that we look at this EUR 1.2 billion figure and what we say is, "Well, tell me not the overall pipeline, but just a committed part of your pipeline, the CapEx that is already committed, which part of these projects are already pre-let?" If we look at this in a different way, we would say that our committed pipeline is been pre-let 52% of this. And let's not forget that this means this pipeline, the overall pipeline means EUR 85 million of additional rents that will come in the future. And that 33% of this EUR 85 million have already been pre-let. We're talking about EUR 28 million. And also, we've been already mentioning this in previous presentations, but we would like to confirm this, is that if we look at the yield on cost that we expect for this pipeline, what we've been saying in the previous weeks is that we confirm the expected yield on cost for the overall office pipeline that we have. In the presentation -- in this presentation today, we have to reconfirm again that we remain comfortable with these yields on cost that you see here on Page 33. If anything, we could see that -- we could say that the Marceau project, which has been news, the most recent news, not only confirm, but exceeded the expected yield on cost that we would -- we had been disclosing in the past. In the past, if you look at our previous presentations, we are talking about 5.2% yield. Now, as you know, we cannot be specific, but we would be talking in the range of 5.5% to 6% of yield on cost. So the total pipeline, if anything, we have reviewed this yield slightly upwards, so from 6.6% to 6.7%. And a final view on our Page 34 on our investment strategy. As you can see in this Page 34, we are a little bit sort of a predictable company because when we started 2015, we said that we want to grow the company organically and nonorganically, basically taking advantage of the Spanish cycle at that time. And basically, with a great component of alpha kind of strategies, meaning projects where the return was coming from, let's say, our initiatives, not only of -- from the -- where the market was going. A couple of years ago, we started to change a little bit the profile of our activity, and 2019 was already a year where we were more kind of a net seller, as you can see here. And I would like also to emphasize that in these last 2 years, besides being sort of more a net seller, the other thing that has driven our strategy has been what we called our flight to quality. So everything we have been doing in the last 2 years has been mainly disposing of either noncore or nonstrategic assets of what we believe lower quality and invest in what would be high-quality assets or high-quality kind of exposure as we did, for example, in our last transaction in SFL. So that explains a little bit where we are in terms of investment policy. So as a summary, we've shown that we're coming from a very strong initial point, which is first quarter results. They are widely known, but maybe today, we emphasize where these results stand on a relative basis compared to the market. That will be message number one. Message number two, concerning that COVID period that we've gone through, we've been sharing with you that from an ordinary point of view, we've been going through a letting activity that has been more than okay and extraordinary, if we refer to the Marceau transaction in France. If we talk about the non-ordinary, let's say, part of this period, the management of this crisis that was generated with a lockdown, basically, today, what we wanted to share with you is that having gone through this and having finalized negotiations with our clients, we confirm that the impact of this will be 2% of our annual gross rental income. That means around EUR 7 million in terms of discounts. And today, we wanted also to highlight the sophisticated nature of the process we've gone through, which means that we have revisiting -- have been revisiting each contract to have, let's say, a quid pro quo that was fair and allowed us to obtain in the change of certain discounts, increased maturities, which means an increased equivalent of rent, which is secured in the current situation. So that's a little bit the summary of this period. We've also emphasized how we did work at different -- in the different angles of the assets and capital structure and also this strategy. Other news being our transactions, meaning the disposal of the logistic portfolio that was interesting news from last week and the acquisition of a JV in order to work in the wood building that was signed a few days ago. And also, the idea today was to share with you where Colonial does stand in terms of nonfinancial highlights. And I think that information we've been sharing with you shows a quite remarkable results for year 2019 and this year until today. So this is basically the outcome of what we wanted to share today with you. And now we are ready to answer any questions, myself or Carlos or Carmina. So we will be happy to go through your questions. Thank you.

[Operator Instructions]

I think I have received a question.

The first question comes from Peter Papadakos from Green Street Advisors.

Can you elaborate a little bit on your occupants, if possible, in terms of in the different cities, the 3 different cities? What kind of physical occupancy are you seeing from your occupants now? Is it increasing? And any sort of anecdotes that you can share in terms of what are they more nervous about? Are maybe taller buildings a little bit more worried about? Obviously, you don't have that many tall buildings but any sort of comment on the behavioral patterns that you see would be interesting.

Yes. Carmina would like to add something on this.

Well, well, first, I think our clients, I would say, 100%, almost 100%, 90-something are actively, these days, occupying the -- our offices, our buildings. In terms of different occupiers, because of the protocols, because of the social distance and the density, I would say 50% in average terms of the employees are these days actively going physically to the office. This is for Spain. In France, this figure is much more higher. This figure in France, at least our teams says that, broadly speaking, between 65% and 70% of the -- our clients has occupied. So the majority of our clients, 65%, 70% of employees are physically these days going in the offices. So probably answering your questions in the first. Now the reaction has been, first, implementing the protocol, the social distance and guaranteeing the social distance in the -- with the workstations in the -- in our offices for the -- our clients. And this means in Spain 50% going typically and changing days that they can go to the office. And in France, this figure is much more higher than the ones I mentioned here. But our clients have, in a nut, trying to normalize the situation going to the world, but implementing in short term the protocols for balancing the social distancing.

On my side, I would like to add is that, obviously, the longer-term strategy of companies have not already been clearly stated by the clients, which are thinking about what's the best option for the future. But I would like to say that -- as on our side, our philosophy, which is not only from now but is in for many years, we believe a lot in the kind of buildings that, number one, are bigger than smaller, if possible; and number two, are if possible, are more horizontal than vertical. And I'm saying that because we believe in 2 things. We believe in efficiency of -- in the end, not how many euros per square meter you are paying, but how many euros per employee is a client paying. And second, if the future is going to be more content-driven and an office is going to be defined as a place where people likes to go because things happen there, it's rather difficult to provide a beautiful experience, the more thin and tall a building is and it's more easy the more horizontal and big the floor plans are. So as an example, I remember a few years ago that in Madrid, we were offered to enter into the process of buying any of 4 big towers in the north of Madrid. I remember the time that even one of them belonged to a former shareholder of Colonial. Instead of being exposed to this, we prefer to buy the IBM headquarters, which is a sort of horizontal skyscraper that is almost the same size. So we have a little bit of this policy because we believe that there's still no clear evidence of that, but the normal pattern of behavior should be that clients pay more attention to efficiency and pay more attention to content, to what can they do in their offices for their employees. And therefore, the assets have to be the right ones in order to provide the right answer for that.

Yes. Understood. And if I may, a second question. Just looking at external economists there. If I look at Paris and Berlin, among the 25 cities, sort of the main 25 cities of Europe, they are ranked sort of bottom 3 in terms of GDP growth this year. So can you just -- again, why will the office market -- even the office markets that you invest in somehow escape that very, very large GDP decline. What ultimately is it? Is it down to just lack of supply? or just the exposure you have to specific tenants, which will outperform?

Yes. It's -- obviously, it's difficult to provide an answer to that. And we are crunching numbers as you do these days to have the maximum evidence available, looking at our portfolio and looking at the current situation and comparing this with past situations. But yes, I think that one obvious first answer has to deal with current status in terms of occupancy and vacancy. So if it's 2%, the starting point, it's 2%. And the second is the fact that when you are in a CBD environment, there's no expected supply. So let's imagine that in the past, you look, for example, at Madrid -- to put an example, we will talk about Paris. You look at the past 10 years or 15 years, and you see how the city grew during all of these years. And yes, you could wonder if that kind of growth of new buildings that are being developed in secondary areas, if that trend can remain because there will be maybe not the same demand that could match this new supply. So probably the new supply makes no sense. But a different question is, well, in the meantime, I have a CBD portfolio, which is downtown and it's full. And until 2 months ago, I had a list of people that were calling us and saying, "Call me if you have anything that becomes available in the next year." So I think that -- I mean, it would be very arrogant to say that we are hedged from anything that's happened to the economy. I mean anything that happened will have an impact in everybody and also in our assets. But from a micro perspective, not from a macro perspective, I think the dynamics of these kind of assets have to be different because of this supply and demand nature and because of the current vacancy that we have at the beginning of this period.

The next question comes from Celine Huynh from Barclays.

My first question is about incentives. Can you talk about the incentive rates that you've seen for the lettings that you've done post COVID-19 and if they're higher than for pre-COVID lettings? And my second question is, you're sticking to the completion rates -- date, sorry, on the development project. The yield on cost are even higher sometimes than for -- than in the last update. And I had assumed that there would be continued delays on completion due to COVID-19. So can you provide any color on that?

Carlos could answer on this one.

Yes. There is no relevant change in incentives. Basically, the incentives of 2 elements that drive them at the moment and also pre-COVID that is the length of the contract and also the location. Some of the secondary things that we signed has a little bit more incentives. The others had lower incentives. It is totally in line with what we have in a normal pre-COVID market. So as of today, we have not seen any change in the incentives given. So as of today, it is in line with the pre-COVID situation.

And about CapEx, please? Carlos? Second question. About the CapEx delays.

On the CapEx, if we have to put CapEx on the incentives? No?

No. No. On the CapEx delay.

The CapEx delay.

Yes, we have, of course, well, some in the lockdown period, which was -- the hard part was to wait, but we restarted the work. So no delay expected on the project pipeline, except the ones that we decided to postpone and to postpone the CapEx and to delay a little bit the works, but it has been a decision taken considering the situation, especially on Mendez-Alvaro to delay 6 months the work program. But the rest of the project pipeline is on track and expected to be delivered in line that we announced in pre-COVID. And it's what you see in this presentation also being updated for each process. So no material delay for the project pipeline.

And regarding the figures, basically, we guided in first quarter on this. The guidance we did in the first quarter hasn't changed. It's confirmed. So you can use the figures that we guided before.

If we look at the 4 bigger projects in our development pipeline, 3 of them are the French ones. And 2 out of these 3, the client is already expecting this to be delivered. So I mean, the only thing we have to do is deliver these as soon as we can and no major -- no relevant deviations have happened. In the case of the Spanish one, which has been the Mendez-Alvaro, Carmina was saying, yes, there we delayed, but it's basically -- it has to do with the fact that at the moment where the auction among construction companies had to take place is where the lockdown started. So we thought that it was a nonsense to auction these development among construction companies at the same moment that the lockdown was starting. So we thought that it would be wiser to wait a few months and come back to the auctioning of this project in the last part of this year. And so that's what the only relevant delay that has taken place and the reason being the exact nature of the project and where did we stand at the moment of the beginning of the lockdown.

Okay. Can you say something on -- about the yield on cost, which are higher than the last update, where did you get those cost savings, for example?