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

Welcome to the Inmobiliaria Colonial 2020 Full Year Results Presentation. 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. Pere Viñolas, CEO of Inmobiliaria Colonial. Please go ahead.

Thank you. Good afternoon, and welcome, everybody to the presentation of the results of Colonial. By the way, we are trying to improve our communication tools. And today, we are following a new platform. So I hope this will work smoothly and will allow us to have a better communication with everybody. So I will run you through the presentation as usual. I have with me in this presentation, again, as usual, Carmina Ganyet, Corporate Managing Director of Colonial; as well as Carlos Krohmer, Chief Corporate Development Officer. I will now switch to the introduction of the presentation, where basically, we are sharing with you the main financial results for 2020. First of all, let's start with the main data. Our EPRA NAV, with its new wording, is at the end of 2020 at a level EUR 11.27 per share, which basically means that we are today sharing with you our results which are mainly stable. In fact, if we would include the dividend paid during 2020, that would mean a totally stable total shareholder return. The EPS of the company, earning per share, for 2020 is EUR 0.271 per share, again, close to previous year levels. We will insist during our presentation today that any look at our data has to bear in mind that we have gone through substantial disposals, as you know, that we have shared with the market recently. And it's also worthwhile to have a look to our results on an adjusted basis considering this picture. And the earnings per share, including the impact of disposals, if these disposals have not been there, would have been 5% higher. So it's 1% higher actual data. But having a different look, it's a much better outcome. As you know, as I just said, another important feature of this year has been the disposal of more than EUR 600 million in assets. All of this done at double-digit premium on latest appraisal value, 11% premium on GAV. Including this, our gross asset value remains at EUR 12 billion, with a like-for-like of 1.2%, interestingly, 4% like-for-like for Paris. The gross rental income is EUR 340 million, with a 1% -- 1% like-for-like. And the net rental income is EUR 318 million, 2% like-for-like; 3%, if we were only talking about offices. This year has been a year with 2 main issues that I will refer to. One is this disposal exercise, this disposal strategy. The other is, of course, the COVID environment. Those 2 are features that are having rather an impact in performance, and our results are particularly satisfactory if we bear in mind these 2 topics. This issue of disposals as well as the overall performance of the company means also a stronger balance sheet at the end of the year. The loan-to-value now is below 35%. After substantial debt issuances, EUR 1 billion of bonds, EUR 2 billion in total and liability management exercises. All in all, with our strong investment-grade rating remaining the same level, BBB+, from Standard & Poor's. So capital structure enhanced KPIs. And our ordinary activity remaining quite satisfactory during the exercise. Our office collection rate at 99%. And our occupancy at 95%. You will see solid letting activity ongoing with good terms. 100,000 square meters leased with interesting rental growth attached to this activity. You will see the numbers in just a minute. And in the meantime, our project pipeline prelets exceeding target. And last but not least, an acceleration on our ESG with very good ratings at GRESB level, at CDP level, at Vigeo, Sustainalytics; the overall decarbonization strategy with very interesting features. In Page #8, we have, again, this data with more detail. I mentioned the NAV that it's at EUR 11.27 at the end of 2020. That goes hand-in-hand with a capital value growth with a like-for-like of 1.3%. Slightly more positive in Paris -- sorry, 1.2%. Slightly more positive year-on-year in Paris, 4%. Slightly more negative in Barcelona and Madrid, minus 3%. The gross rental income, minus 1% like-for-like, as I mentioned. The net rental income, plus 2% like-for-like. The recurring profit, EUR 138 million, minus 1% year-on-year. The recurring EPS, EUR 27.06, minus 1% compared to year-on-year. I already mentioned the data on the balance sheet, which is quite satisfactory. On the -- on Page 9, again, as I mentioned regarding these headlines, the EPRA vacancy, 4.8%. The volume of square meters signed during the year are almost 100,000 square meters. And as you can see in the document, going through the GRI and the net rental income growth, if I, for example, show the figures about the net rental income, the net rental income for the company has grown 2%. The like-for-like for offices would be 3% of growth. And if we go into the details, Barcelona and Madrid, showing a remarkable like-for-like growth, 9% both. Paris showing a slightly negative growth on net rental income. This, as we will explain more in detail, in the case of Paris, has to do with our small exposure to retail and business centers because, on the other hand, as it is shown also in this Page 9, we remain with a healthy rental growth. During 2020, our rental growth was 9% in Paris, 6% in Barcelona, 2% in Madrid. Let's remember that rental growth means rents actually being signed during the year compared to December '19 ERVs included in our evaluations. So all in all, a year which has been, for us, satisfactory, with good figures of activity, good figures of growth. And in -- particularly remarkable in a year where we have, let's say, disposed of a substantial number of assets that have, of course, have an impact in our cash flows and in our main KPIs. I would like to refer, in particular, to the other driver of this year that I mentioned, the other element that we have to take into account, which is the COVID crisis. On Page 11 of the presentation, we have all of the work done during this year, which has been substantial. And the last milestone being the sale of assets that took place in December and January for more than EUR 400 million at a -- in very good circumstances, which was done at a premium on JV of double digit. In Page 12 and next pages, quick comments on this COVID. First of all, what is our collection rate in Colonial in this environment. While this -- our collection rate is 97% in the case of offices in the quarters Q2 to Q4. But at the end of Q4, our group collection rate, it's at 99%; 100% in Paris; slightly less in Spain. But all in all, 99%. So collection rates are extremely healthy. The dynamics of negotiation with clients that have been impacted by the crisis, Page 13, are as follows. Well, we've gone through our first wave in the first half of the year. To summarize and not to be too specific, then there is a second wave that would be the second half of the year until today, I would say. We've had conversations with a substantial number of clients. And the overall impact that this has meant into our GRI is a one-off 4.5% of our gross rental income, this 4.5% compared to our annual topped-up GRI. This is, as I say, a one-off allowance for those clients that were reached by the COVID crisis. But that -- this was part of more complex negotiation and discussion where there was a trade-off, this kind of, let's say, support being provided by Colonial, on one hand, extended maturities being obtained on the other hand. So the overall conclusion being quite satisfactory for both our clients and Colonial. And this 4.5% is, as I say, again, it's a one-off impact that when you go through this, means that in the P&L of 2020, this impact is of around EUR 6 million. The rest, having to be impacting 2021 and a little bit more of 2022. Well, this is an introduction. I will come back to our strategic view of the market where it is, where we see ourselves, what kind of conclusions can we obtain from these results. But now what we'll do is as follows. First, go through a quick review on market conditions, then a quick review of -- or more detailed review of operational performance, finance performance. And then we'll come back to fundamental strategic conclusion. I will now ask Carlos Krohmer to step in on this section devoted to market.

Okay. Thank you very much, Pere. So we are now at Page 15. On Page 15, we've put an update of the latest figures of GDP projection of the IMF. And basically, what is interesting about this page is that 2021, 2022, as everybody know, hopes and expect we're going to see positive GDP growth. And if we look at Europe and the different economies in Europe, Spain and France, especially in Spain because it had been hit very, very strong in 2020. On the other hand, that are the economies where we're going to see, according to IMF January figures, the highest growth in the next 2 years, well above the European average. So being in Spain and France should be interesting in terms of playing the recovery out of the pandemic. If we then go a step further to our market where we are on Page 16, what we like to do, what we zoom is on the niche where we play. As you know, Colonial is specialized on the high-quality slice of the market in terms of product and in terms of location. So what does this mean that, really, the clients that we capture are the clients that look for the grade A space in the city center location. And here, you see how the situation looks like for the 3 cities where we are operating. On the first column, you see the size of the market -- of the CBD market, 1 million square meters in Barcelona; 3 million in Madrid; and 7 million square meters in Paris. And you can see what is the proportion of grade A product in the market in the total stock, roughly 1/3 in Spain and just 9% in the CBD of Paris. If we then look further and look what is the available space. So even after this pandemic year that has been quite difficult, we have still a relevant scarcity of grade A product. We have in Barcelona just 13,000 square meters of available grade A space. This means 1.5% of the CBD market. In Paris and Madrid, we have roughly 64,000 square meters of grade A space available for people that are looking for it. This means 2% of the CBD market in Madrid and below 1% of the CBD market in Paris. And we also look at future supply is not really a very big volume coming up in the next 2 years. So we remain -- the markets remain in a situation with almost no supply for the type of product that Colonial is offering. On the next page, we see the other part of the market, on Page 17 I'm now. You can see here on the left-hand side, the columns of the quarterly take-up. Obviously, the take-up has suffered a lot. What we are seeing that we are seeing a little bit of stabilization coming a little bit back to Q1 levels in the second half of the year. And regarding the prime rents in Spain, they have a slight correction, but being more or less at the level of beginning of the year. And in Paris, we have seen increase on the prime rents. This is also, at the end, seen and reflected in our portfolio. I will go to it with more detail. We have here put some examples with rent side, both of the market and also for our portfolio. And then Page 18, regarding the investment market. The investment market clearly had like a stop from Q2 onwards and there were no wishes that could be done. And then the markets have been coming back Q3 and even more Q4. Spain has suffered quite a lot in volume in Barcelona. The total annual volume was EUR 500 million. This is well below EUR 1.5 billion of normalized high volume. And in Madrid, it also came down. However, this is also because the supply of core CBD assets in the market was quite low. It's not just demand driven. In Paris, the year -- the total volume in offices was EUR 19 billion. There you see -- can see again that it's an extremely deep market, much, much more deeper than the Spanish market. There, we saw moreover, yield compression in the second half. And as you know, we have also benefited from this in a way that we -- that we sold 2 mature assets at very good terms. There, this -- the volume in the Paris market is lower than the previous year. Volume that was a record year, but it's still well above the 10-year average. So quite a deep and liquid market. Let me now make an overview of our operating activity. I will pass to Page 20. As Pere already mentioned, we have signed close to 100,000 square meters. I think the interesting part of this is -- and if you look at the quarters, and in gray, we have highlighted the COVID quarters. Every single COVID quarter in Colonial, we've had quite a decent activity, close to 30,000 square meters, 28,000, 27,000, 28,000. And all of the 3 quarters in the COVID phase have doubled the pre-COVID quarter. And this, moreover, in good terms with double-digit release spreads, with growth on ERV. We've signed contracts with good maturities and we are maintaining a vacancy rate around 5%. If we go more into the detail on the left-hand side of Page 21, you can see the release spreads, where we compare the pre-COVID quarter and the COVID quarters. You can see that on every single market, the figures are quite similar. And when we go to the market rental growth in our portfolio, so price is signed versus the market rent pre-COVID at December 2019. What you also can see is that the COVID quarters were quite similar to the pre-COVID quarter. And in Madrid, moreover, if we take out one big resigning that we had on a big asset. All of the rest of the assets had quite a strong increase also. So plus 5% in Barcelona versus the ERV, plus 10% in Paris and in Madrid, overall plus 2%, but excluding one big contract that had a good release spread, but had a little bit of rent correction, plus 7%. So all in all, a quite healthy performance. Page 22, as we always show, is just to show different examples. So this is really something that is across the portfolio on every single asset. Another very remarkable element of the operating performance in 2020 and is that we have fully let the Marceau project that will be delivered at the end of 2021. You can see here on Page 23, the 3 tranches. We started with Goldman Sachs, and then we let up in the following quarters Q3 and Q4, the remaining part of the building. So it's now 100% let in very good terms with long-term contracts. And moreover, what is more important, it has been above the market rent that we were internally targeting. So we are obviously very, very happy with the outcome of this project situation. Now we are working to deliver it on time so that at the end of the year, this can start to generate cash flow. And then we delivered this year, another project of the project pipeline. So this is on Page 24. This is now delivered. It will not be part anymore of the project pipeline because we have done the job. It's Castellana 163. This is something that we bought in an opportunistic transaction many years -- some years ago. And that was something that we have renovated floor by floor. And moreover, we've made all the facades new. We have now -- this asset is 91% let. And what you can see is the transformation of the building has enabled to transform the rent of EUR 14 per square meter a month to EUR 28 or more than EUR 28, even. So -- and obviously, capital gain on this project, if we look at total cost of acquisition price plus CapEx, is quite substantial. We have created value of 1.8x. So 80% capital gain. So this is what is really Colonial's business model all about, to identify this type of things and create this grade A product. When we then come to Page 25, here, you can see the evolution of the vacancy profile. We have overall vacancy of 4.8%. Interesting is that we had quite important progress year-on-year on the Madrid market, where we have been letting up basically difficult product also inherited from the Axiare acquisition. And in France, we have a 5.6% vacancy at the end of the year, but it's important to take into consideration that the relevant part of this vacancy is the entry into operation of the Grenelle asset, that is asset of our renovation program. So this is an available surface that once we let, it will generate additional cash flow. So if we adjust this, the like-for-like vacancy profile of the Paris portfolio would be 3% and also of the overall portfolio would be 3%. On Page 26, is to highlight a little bit more in detail where this vacant space is. On the one hand, we have entry into operations of the renovation program. I mentioned already Grenelle and also Torre Marenostrum, the former Naturgy headquarter. We're building a new headquarter from them, and now we are not retransforming this building. And then also, that is always a little bit more difficult product, things that are outside the city center as the examples that we see here on Page 26 are always, and especially in these times, more difficult to lease. So this is where we have part of the Madrid vacancy in our portfolio. And with this, I will pass to the next section.

Thank you, Carlos. I will cover the financial section. As usual, these sections, we show how the operational performance is impacting in our key financial metrics. The first one -- I am in Page 28, the first one is the gross rental income. So the first message I would like to highlight is the positive impact of the obvious like-for-like growth. So adding the EUR 3 million on our gross rental income. The second positive impact is thanks to the renovation program, adding EUR 2 million in 2020. Also, the gross rental income is impacting this year for -- negatively for the only hotel we have in Paris, with EUR 7 million decreasing our rents due to the COVID and due to the lockdown. And due to the disposals and uploading the secondary assets, as we mentioned, we -- of course, we have a negative impact in our gross rental income of EUR 10 million. So the total income that we show during 2020 is EUR 340 million. And how are -- what are the main reasons of this like-for-like growth? I am in Page 29. Basically, the like-for-like growth is largely driven by prices increases. As you can see here in the offices for Barcelona, mainly the like-for-like growth is 5%, mainly driven by price. Madrid due to that we have been actively increasing the vacancy -- sorry, the occupancy rate, the like-for-like growth is driven by prices and also by occupancy. And in Paris, although you can see here the price, it's minus 0.1, it should to be explained because part of our office buildings in Paris, we have some retail areas, some retail spaces being heavily impacted due to the COVID and due to the lockdown. So excluding the retail part for Paris, the like-for-like growth, thanks to prices, also shows a positive impact of 1% as you can see here in the split in Paris also. If we go to Page 30, as you can imagine, this year, we have been very focused to efficiency. So it has been -- so this huge effort on efficiency in the net rental income, showing this positive net rental income total portfolio of 2%, but on office 3%, especially in Barcelona and Madrid, showing this positive 9% due to the efficiency efforts. As we mentioned, and as we explained in the Alpha V projects, I am in Page 31, this year, we have been disposing more than EUR 600 million, EUR 617 million, mainly impacting in 2020, EUR 200 million. And the rest, EUR 400 million will be -- has been settled and has been executed during last quarter of 2020 and first quarter 2021. This is very important because this is a very successful outcome with this 11% total premium on the last reported GAV. So the last pre-COVID loss rental income December '19. And in terms of offices, as you know, we have been selling some retail and the settlement of logistics. But considering only offices and has been the -- not the best assets that we have sold, as you can imagine, secondary and mature asset, the premium achieved has been 13%. But I would like to highlight that this huge effort of EUR 600 million, of course, should be considered in the future gross rental income in 2021. So in 2020, we only have impact of mainly EUR 200 million has been sold -- or has been sold during 2020. But the full amount of EUR 600 million will be impacted in the next gross rental income -- in the next rental income of next year. Of course, locking the value with this positive premium. But as you may consider, this will be mainly considering for the forecast of 2021, this sale of EUR 600 million. In the next page, I think we explained very well in Alpha V presentation about the main assets that have been included in this disposal program and represents EUR 500 million of the total gross asset value that we manage. As you know, the settlement of logistics, other noncore assets, retail, secondary assets in Madrid and also secondary assets in Barcelona, and 2 important mature offices in Paris, which, at the end, results at a very interesting premium and a very capital creation -- capital gain for our shareholders. In the next page, the other important metric December '19 is the valuation. The valuation mainly shows a positive growth of 1.2% like-for-like, especially in Paris, an increase of 4% total year. Barcelona and Madrid, they will come later, the sources of the reason of this minus 3%. And as I mentioned, our total valuation is impacting of the disposals that we have been executed in 2020. So the total gross asset value, it's EUR 12 billion -- we maintain this EUR 12 billion with a group to increase like-for-like of 1.2% and especially positively impacted for Paris. And some comments on Barcelona and Madrid that I will show now. In the next page, these are what we would like to share with you what are the main sources or the main reasons of the valuation of -- this valuation. As you can see here, we split the impact on the [indiscernible] in terms of the valuation due to the project delivery, which are, of course, impacting positively our [indiscernible] 2.2%, especially in Paris that we have been [indiscernible] the value of projects that have been prelet, as we mentioned, plus [ 2.2% ]. The other important [indiscernible] impacting our valuation are yields. In Paris, we experienced some yield compressions. As you can see here with -- 3% adding value due to yields. So the yield compression is [indiscernible] in Paris is impacting in our positive valuation. And in Barcelona and Madrid, basically the valuation for yields are flattish. But this minus 0.5% in Barcelona and minus 0.3% in Madrid basically is driven by some additional expansion in yields in the secondary. So prime yields in Barcelona and Madrid remain flat. And some prime -- slightly compression. But as some secondary assets, although we don't have a huge exposure so we don't have a very low exposure in secondary assets or secondary locations. The secondary location has been impacted by [indiscernible] which is in blended impact [indiscernible] maybe, I would say, irrelevant impacting in 0.5 and 0.3 [indiscernible]. Another source of reasons or driver, including in the valuation is the ERV. So as for ERV that we are closing impact on the ERVs. So it's a nonrelevant impact due to the ERVs, mainly in our locations have remained flat. And another -- the last driver impacting the gross asset value updated or gross asset value is the growth profile. So how looks the growth profile of the rents for the future years. And in June 2020, when we released the same figures, we explain the same split on the valuation and basically, the price forecasted a V shape in the growth profile of our portfolio. Now due to the extension of the pandemic period, this growth profile shows more a U shape, which means this, at the end, resulting in this negatively -- a negative impact on the growth profile in Paris, minus 1.5%, and in Spain, roughly speaking, minus 3%. So to summarize, yield compression or yield -- stable yields in Spain for prime assets. Slightly in compressions in Paris, spot Tier B, flat. And growth profile following the pandemic period, which means more U shape rather than V shape. This is how we arrive this like-for-like positive 1.2%, impacting at the end disposal, shows minus 1.4% gross asset value. In the next page, the other key metrics in the financial as a consequence of all the operational performance is recurring results. We show here how would be our recurring earnings without disposals. So without disposals, the recurring earnings would be EUR 0.2883 per share, which means EUR 147 million. But of course, considering the disposals and showing a more resilient and more quality profile of our EPS would -- you can see here, the impacting of this offloading secondary assets, result in a very stable recurring results. So we maintain the recurring results. In a year -- in a very tough year, selling assets for more than EUR 600 million, of course, impacting half of this target or half of this achieved in 2020. And of course, considering -- or reaching a more stable, resilient and quality profile of this recurring EPS. So stabilizing EPS, more quality one and a more resilient, thanks to the disposals. And the next page, basically, it's how our profit and loss account looks like. The metrics, as I mentioned, are the ones you can see here. Gross rental income decreasing minus 1%. Very, I would say, 4% minus recurring EBITDA, stabilizing the recurring earnings, although being sold a substantive amount of secondary and mature assets. Due to the revaluation as I mentioned. So we have a positive impact, thanks to valuation of Paris, but negatively in Spain -- or slightly negative in Spain. This -- you can see in our P&L impacted negatively EUR 75 million, which is a very, I would say, a very consistent figures due to the period that we have been managed during 2020. And then, as you know very well, we have been managing very actively the balance sheet through different liability management to anticipate certain risk in terms of financial aspects during -- especially during second quarter of the year. So this has been impacting this liability management in the financial nonrecurring results of this EUR 33 million. So totally, the profit attributable to the group after nonrecurring, I would say, impacts shows EUR 2 million, which is positive. But I would like to highlight here recurring earnings, very stable, a very, I would say, limited impact on the valuation and consistently, this, I would say, capital structure more stable due to the liability management, of course, impacting in this 2020 results. In the next page, I would like or we would like to highlight how this strength balance sheet looks like. So due to the proceeds that we have been raised, thanks to the disposal program, we have been generating in 1 year, EUR 300 million positively. And in 2 years, EUR 400 million. That shows a solid capital structure of 36.2% year-end. But pro forma loan-to-value, considering the disposal that we have been executed during the first months of this year, shows a loan-to-value of 34.8% or less than 35%. That means that we have been -- or reduced the debt of more than EUR 400 million since 2018. So we have generated a net cash of EUR 400 million. So of course, maintaining our investment-grade profile, of course, a very -- with a very solid position of liquidity of more than EUR 2 million. In the next pages, I think you are very familiar with. I am in Page 38. We have been received during the year, the support from the capital markets in several occasions. Also, we have been received the support from the financial institutions through different revolving facilities, sustainable revolving facilities. And this you know very well how we've been very successfully in issuing bonds and receiving the support from the capital markets and the financial institution. In the next page, thanks to that, we have been extended our debt profile maturity. With this, I would say, strengthening the solid -- the capital structure with this less than 35% pro forma loan-to-value after the disposals. As I explained, a very, I would say, solid liquidity position and a very healthy debt maturity profile. So consequently, what has been the total shareholder return due to the year results and the appraisal achieved, I'm in Page 40. So the EPRA net tangible [indiscernible] we have created capital value in France. We have being impacted in Spain of this EUR 0.47 per share due to the valuations. Also, we have been positively adding the foreign air means, and we have been also distributed a dividend of EUR 0.20. So the EPRA net asset value or the net tangible assets at the end of this year shows a figure of EUR 11.27. But adding the dividend paid during 2020, during this year, basically, we have kept -- we have maintained the value for our shareholders in a very, I would say, in a very tough or in a very difficult year for all the companies with all the -- with a period of time -- during a period of time with no activity. I think we are very successfully -- or we are very proud to that we have achieved at least maintaining the value for our shareholders, considering the difficulties of this year for everyone.

Thank you. This is Pere speaking again. Okay. Now I would like to talk a little bit to you about our ESG policies. You know that this is an important topic for us that we give high priority to this. And we have also gone through a very successful year, I believe. First of all, on the next slide, a quick view on decarbonization. Basically, we are aligned with the Paris Agreement, our objective of a carbon-neutral portfolio in 2050 goes on the right track. And just as very simple data. In the period ending 2019, our like-for-like carbon emission reduction has been substantial on a carbon footprint in terms of kilograms of CO2 by square meter is just now at 8 kilos after this period. In terms -- next slide, in terms of our certification of our assets, we finished 2020 with 93% of our buildings with quality certifications in the LEED or BREEAM, which is, as you know, a very long-term strategy. And moreover, other good news have taken place on this issue. If I go to the next slide. Regarding CDP, we finished 2020 with A-, which means, I think, substantially above what would be the European regional averages in the financial service sector in Europe as a whole. That shows substantial lower certifications or qualifications. That would be the CDP one. Next slide, 45. GRESB had a fantastic year. We finished 2020 with 90, that would be the level of a score achieved at GRESB level. As you can see in this slide, we have come a long way from being at the level of 60 in 2017. And since then, 61, 77, 9 -- now 90. It's not only a very good achievement in absolute terms. But also in relative terms, I believe that we are really at the high end of our comparable universe. Next slide, in terms of Vigeo, a quick reminder, A1. So again, a very good performance. Next slide. In terms of Sustainalytics, 10.5. Again, in a very good level. And MSCI, we finish at the level of A. So basically, the qualification level achieved by Colonial in this year has been remarkable. Finally, just to remember that -- to remind you that in the field of new construction methodologies, we started this WittyWood project in Barcelona 22@. That goes in time, and that would be a very interesting project of a first office building being built entirely in wood. So very good year besides what we saw as a very positive year in financial terms. I believe that it has also been a very good year in terms of where do we end in terms of sustainability and environmental issues and ESG policies, in general. This last section would have 2 comments. One comment would be on our strategic approach, how do we see our strategy at this moment. And then I will end with some conclusions on what Colonial in the end is delivering, we believe, at this moment, in the market. Well, we are consistent in our messages to the market. We remain a company that believes in the risk-adjusted return coming short and long term from our focus, which is the exposure to prime CBD offices. And as we have been explaining in previous presentations, this is not, let's say, a back-looking approach, let's say, an old-fashioned approach to the current challenges that we have today. But we believe that it's the right positioning for the current challenges and opportunities that we have in our business. We basically believe that our strategy allows us to perform better in terms of efficiency environment, providing the best experience to clients. And we work in this direction through our flagship projects that we are working on, and also to our investment and divestment strategy. Quick comments on this. Regarding the efficiency proposal that we have for our clients is simple. Number one is based on location. The usual map regarding what do we own and reminding everyone on how elastic the concept of prime is. We like to refer on a regular basis to our locations as an example of simply providing the best place to be for our clients and the most efficient product that we can have. This -- by the way, this efficient proposal of good location is supported by the market on a regular basis in terms of valuation levels. So all of the transactions we see on the market compared to the Colonial valuation, it's always an opportunity to reconfirm how comfortable we are in this environment. And again, referring to the divestments we've done during this year, again, it has been a confirmation that the market is usually above our appraisal values. In terms of the second topic, which is environmental, I'm not going to, let's say, be more specific about this because I just went through these topics. But environment is at the heart of our strategy. And we believe that being in the prime locations is closely related to be, let's say, optimal in terms of sustainability. As we mentioned in previous presentations, if you have the more holistic view to sustainability, in the end, the prime location offers not only an efficient performance of the buildings that can happen, I understand, anywhere even in the middle of nowhere. But if we talk about the overall carbon footprint of any client of any company that is in our buildings just by referring to the location of our buildings, our proposal is much more optimal. So our strategy is about providing the most efficient experience for our clients, the most environmental-friendly strategy. But also to provide, let's say, the more exciting experience for our clients. So we try to be in the best location, but also to have the best product, which means kind of low-rise buildings, we are not delivering big towers. We are not efficient. We believe in horizontal buildings, very good, well-placed that allow for flexibility, that allow for efficiency and that allow to provide for the best experience for our clients. And that's closely related to the kind of products that we have in the best locations. Because of that, we have the loyalty of our clients. And a number that I usually like to refer to is that a vast majority of our clients are with us for the very long term, have been with us for the very long term and have an average number of years that are with us, which usually is quite long. And because of this approach to value, not to, let's say, a more cost-oriented kind of approach, we have this loyalty of the clients, and we have the better upside that we can imagine for our rents. And in Page 56, you can see a quick view of the potential reversion that we have currently in our buildings based on the fundamental value that these buildings have. This can be seen also in Page 57 when we refer to the new projects that we are going through. This year, we saw the happy end for Castellana 163. Just starting now this year, we have seen the happy end of the Diagonal 525, which is about to be delivered in the next few weeks. And we will see this year probably the final outcome for Miguel Angel for Velazquez in excellent terms. And we will keep on working in Mendez-Alvaro and Plaza Europa and Sagasta for the years to come. And in the case of France, you've seen the good news in Marceau and in Louvre-Saint-Honore in terms of preletting. And our next, let's say, goal is to put on the market Biome, and have the same kind of success than we've had with all of our pipeline until now. Page 58 provides you with a view of our pipeline, which is not great news, but basically, again, we reconfirm our vision on the yield on cost that these projects should deliver and therefore, the capacity of generating rents that we have in this company without the need, without any particular need from new investments, from the market doing this or that. So if we deliver what we have to deliver, we have substantial room for additional rental growth in next few years. That should have an exciting impact in all of our KPIs, in our gross rental income and in the end, in the earning per share. And finally, we are happy about the way we've been approaching the market in recent years regarding investments and divestments. Investments was the normal, let's say, trend in 2015, 2018. Then we reversed the trend towards more, let's say, kind of a divestment mood. But always with the rationale, which was, if we buy, it's because we reload our prime. If we sell, it's because we are offloading noncore or mature assets. And this year, 2020 has been a year with -- where mainly we have made money for our shareholders through disposals. And let me, let's say, blunt or be clear about our -- these disposals. This year, we have sold, in 2020, EUR 600 million, which is in excess of -- which is kind of 5% of our portfolio. Obviously, we have not sold the best that we have. We have sold probably -- or for sure, what we didn't like. And we have sold what we didn't like at a double-digit premium. So if our NAV, it's EUR 11.27, and this is related to our appraisal values, while we have sold at a premium. That means what it means. And either our product is very good. Either our appraisal values are already prudent. But in the end, again, as I say, we sell -- and I would emphasize we sell because, as you know, sometimes selling is not so easy. We sell 5% of our portfolio. We sell not the best that we like, and we do it at a double-digit premium. I think that the implied information that we get from this is very positive. Well, all of this strategy, in the end, of being focused on prime, being focused on high-quality product, being focused on resilience, being focused on creating alpha through our pipeline and trying to do a good job in buying and selling, we believe that the market is supportive of this, and this is what Page 60 is telling us, even if we go through the painful process of quit, then the performance, it's there. And looking into the future, well, on Page 61, the capacity that we have to upgrade our cash flows, our gross rental income with the potential of what we are currently working is capable to allow us to add almost EUR 150 million of potential rents to our -- to overall income. So we remain committed to the kind of strategy that we have, and we think it's delivering. That is what we find in the conclusions. In the conclusions, you can see that in the end, we have a solid year. We had a year where we had a solid level of activity, letting activity, which was great, was almost average, looking at our previous years. But when we went through this letting activity, we basically signed well, so a 6% premium on December '19 ERV is not bad, 17% of release spread is good. After all this activity, we ended with a 95% occupancy level, which, again, it's the same we had at the beginning of the year, a little bit more, but a little bit less of occupancy, a little bit more of vacancy which is good. And in the end, we obtained positive like-for-like growth in our GAV, and therefore, in our EPS, and therefore, in our NAV. So good positive numbers of positive like-for-like in our main KPIs. So finally, you look at this and you say, well, it's been a reasonably good year. And then you -- again, you come back to the main 2 topics that I mentioned at the beginning. Well, but it's been a year where we sold EUR 600 million. Therefore, it's a remarkable note to remain with this kind of KPIs after having sold off this. Second is in the year of COVID. It's not a small topic. It's been very, very important. So you put all of this delivery in the perspective of these 2 topics. And we conclude that these numbers for us are quite satisfactory. Well, this has been the presentation so far. Not only have been satisfactory according to our expectations, but we believe that mainly what we deliver, it's a little bit what we expected, and we expected the market to expect. So thank you for your attention. And now, as usual, and through this new kind of communication tool, we will go through the Q&A. I hope it will work. So as I say, thank you, and we start with the Q&A session.

Okay. Well, I will go for the question. Yes. The first one is I try -- I'm trying to understand the absence of guidance in today's presentation. Is there any pending renewal to be closed for 2021? And also if you could quantify the impact of the Q1 disposals into your full year 2021.

No. Look, about the guidance, you know that we do not anticipate a specific guidance 1 year ahead, particularly in the moment of such level of uncertainty as the one we are going through. But what we can give is a couple of messages that we have been providing in the past, which is we see, of course, 2021 as a year where we should see the impact of disposals. So disposals, if you sell EUR 600 million of assets, you should see the impact of this cash flow not being there. And we see also the market in a transition mood in a new kind of approach, where we see 2021, let's say, more going through the first phase and 2022 more in the recovery phase. Let's say, to provide a gross kind of approach. We would like more to point out 2022. We believe that after this transition period where we're going through, we should raise quite soon our EPS to come back to our pre-COVID levels in, let's say, a 24 months' period or more or less this kind of period. 2021 will -- EPS will go down, but mainly due to the impact of disposals. Beyond that, we do not -- are not having any particular impact in our P&L as of today at this moment of the year.

Okay. And in terms of vacancy, are you confident that the level seen by the year-end can be maintained in 2021?

Well, it's difficult to answer because this particular macroeconomic environment, it's complex. It's a process where we've seen in 2020, the macro in Spain and France worse in many years, so double digit. And on the other hand, for 2021, according to the most prestigious institutions, Spain and France will deliver the highest level of growth. So all this downside and upside will go so quickly that the impact that this may have on the market is very difficult to assess. What we've seen so far is that, well, we started with this kind of discussions now, I would say, a year ago because that's when the COVID started. And after 12 months, all of what we have seen in Colonial has meant a very moderate rise in the vacancy levels. As of today, I will say that the central scenario for me is to follow this path. To use a different kind of approach, I don't have any single input of specific situations that we're going through that should tell us, well, the vacancy should be much higher in the second half. So if it had to be higher, it will be because of unexpected dynamics that have not occurred to us at this moment. My central scenario with information we have today is remaining the same, maybe slightly higher, but not disruptively higher.

Understood. Okay. So just to come back to the first question, why is the reason for not providing a slightly guidance direction of earnings, both investors understand where are we headed in 2021, Pere.