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MarketScreener Homepage  >  Equities  >  Euronext Paris  >  Covivio    COV   FR0000064578

COVIVIO

(COV)
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Covivio: Consolidated financial statements at end-2019

03/06/2020 | 02:19pm EST

COVIVIO

COVIVIO CONSOLIDATED ACCOUNTS

AS AT 31 DECEMBER 2019

COVIVIO

CONTENTS

3.1

CONSOLIDATED ACCOUNTS AS AT 31 DECEMBER 2019………………

3

3.1.1

STATEMENT OF FINANCIAL POSITION .........................................................................

3

3.1.2

STATEMENT OF NET INCOME .......................................................................................

5

3.1.3

STATEMENT OF COMPREHENSIVE INCOME ...............................................................

6

3.1.4

STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY .........................................

7

3.1.5

STATEMENT OF CASH FLOWS ......................................................................................

8

3.2

NOTES TO THE CONSOLIDATED ACCOUNTS......................................................................

9

3.2.1

GENERAL PRINCIPLES ...................................................................................................

9

3.2.1.1

Accounting standards .......................................................................................................................

9

3.2.1.2

First-time application of IFRS 16 ...................................................................................................

10

3.2.1.3

Estimates and judgements...............................................................................................................

12

3.2.1.4

Operating segments ........................................................................................................................

12

3.2.1.5

IFRS 7 - Reference table ................................................................................................................

12

3.2.2

FINANCIAL RISK MANAGEMENT..................................................................................

13

3.2.2.1

Marketing risk for properties under development ..........................................................................

13

3.2.2.2

Liquidity risk...................................................................................................................................

13

3.2.2.3

Interest rate risk .............................................................................................................................

14

3.2.2.4

Financial counterparty risk ............................................................................................................

14

3.2.2.5

Leasing counterparty risk ...............................................................................................................

14

3.2.2.6

Risks related to changes in the value of the portfolio .....................................................................

14

3.2.2.7

Exchange rate risk ..........................................................................................................................

16

3.2.2.8

Brexit risk .......................................................................................................................................

16

3.2.2.9

Risks related to changes in the value of shares and bonds .............................................................

16

3.2.2.10 Tax environment ............................................................................................................................

17

3.2.3

SCOPE OF CONSOLIDATION .......................................................................................

19

3.2.3.1

Accounting principles applicable to the scope of consolidation.....................................................

19

3.2.3.2

Additions to the scope of consolidation ..........................................................................................

20

3.2.3.3

Internal restructuring/Disposals ....................................................................................................

20

3.2.3.4

Change in holding and/or in consolidation method .......................................................................

20

3.2.3.5

List of consolidated companies.......................................................................................................

22

3.2.3.6

Evaluation of control ......................................................................................................................

28

3.2.4

SIGNIFICANT EVENTS DURING THE PERIOD ............................................................

29

3.2.4.1

France Offices ................................................................................................................................

29

3.2.4.2

Italy Offices ....................................................................................................................................

30

3.2.4.3

Hotels in Europe .............................................................................................................................

30

3.2.4.4

Germany Residential ......................................................................................................................

31

3.2.4.5

Other (including France Residential).............................................................................................

32

3.2.5

NOTES TO THE STATEMENT OF FINANCIAL POSITION ...........................................

32

3.2.5.1

Portfolio..........................................................................................................................................

32

3.2.5.2

Financial assets ..............................................................................................................................

41

3.2.5.3

Investments in equity affiliates and joint ventures ..........................................................................

42

3.2.5.4

Deferred tax liabilities on the reporting date .................................................................................

43

3.2.5.5

Short-term loans .............................................................................................................................

44

3.2.5.6

Inventories and work-in progress ...................................................................................................

44

3.2.5.7

Trade receivables ...........................................................................................................................

45

3.2.5.8

Other receivables............................................................................................................................

46

3.2.5.9

Cash and cash equivalents..............................................................................................................

47

3.2.5.10 Shareholders' equity ......................................................................................................................

47

3.2.5.11 Statement of liabilities ...................................................................................................................

47

3.2.5.12 Provisions for risks and charges ...................................................................................................

54

3.2.5.13 Other short-term liabilities ............................................................................................................

56

Financial Report at 31 December 2019

1

COVIVIO

3.2.5.14 Recognition of financial assets and liabilities ...............................................................................

56

3.2.6

NOTES TO THE STATEMENT OF NET INCOME..........................................................

57

3.2.6.1

Accounting principles .....................................................................................................................

57

3.2.6.2

Operating income ...........................................................................................................................

57

3.2.6.3

Income from asset disposals ...........................................................................................................

60

3.2.6.4

Change in the Fair Value of assets ................................................................................................

60

3.2.6.5

Income from changes in scope........................................................................................................

61

3.2.6.6

Cost of the net financial debt ..........................................................................................................

61

3.2.6.7

Net financial income/(changes) ......................................................................................................

61

3.2.6.8

Taxes payable and deferred tax liabilities ......................................................................................

61

3.2.7

OTHER INFORMATION ..................................................................................................

65

3.2.7.1

Personnel remuneration and benefits .............................................................................................

65

3.2.7.2

Earnings per share and diluted earnings per share .......................................................................

67

3.2.7.3

Off-balance sheet commitments ......................................................................................................

68

3.2.7.4

Related-party transactions..............................................................................................................

73

3.2.7.5

Covivio Executive Compensation ...................................................................................................

73

3.2.7.6

Statutory Auditors' fees ..................................................................................................................

74

3.2.8

SEGMENT REPORTING.................................................................................................

74

3.2.8.1

Accounting principles as regards operating segments - IFRS 8 ....................................................

74

3.2.8.2

Intangible assets .............................................................................................................................

75

3.2.8.3

Tangible fixed assets.......................................................................................................................

75

3.2.8.4

Investment properties/Assets held for sale......................................................................................

75

3.2.8.5

Financial assets ..............................................................................................................................

76

3.2.8.6

Inventories and work-in progress ...................................................................................................

77

3.2.8.7

Contribution to shareholders' equity ..............................................................................................

77

3.2.8.8

Financial liabilities.........................................................................................................................

78

3.2.8.9

Derivatives......................................................................................................................................

78

3.2.8.10 Income statement by operating segment ........................................................................................

79

3.2.9

SUBSEQUENT EVENTS.................................................................................................

81

Financial Report at 31 December 2019

2

COVIVIO

3.1 CONSOLIDATED ACCOUNTS AS AT 31 DECEMBER 2019

3.1.1 STATEMENT OF FINANCIAL POSITION

Assets

€ thousand

Note

31/12/19

31/12/18

3.2.5

INTANGIBLE ASSETS

1.2

Goodwill

143,286

113,064

Other intangible fixed assets

23,471

59,138

TANGIBLE FIXED ASSETS

1.2

Operating properties

1,409,707

1,181,280

Other tangible fixed assets

41,855

35,443

Fixed assets in progress

37,880

24,952

Investment properties

1.3

20,837,882

20,139,338

Non-current financial Assets

2.2

259,060

152,847

Investments in equity affiliates

3.2

374,316

249,746

Deferred tax assets

4

61,932

67,965

Long-term derivatives

11.5

51,381

28,752

TOTAL NON-CURRENT ASSETS

23,240,770

22,052,526

Assets held for sale

1.3

324,292

558,848

Loans and receivables

5

27,752

6,469

Inventories and work-in-progress

6.2

232,548

95,811

Short-term derivatives

11.5

26,105

18,200

Trade receivables

7

376,730

313,212

Tax receivables

9,195

8,423

Other receivables

8

175,316

153,872

Prepaid expenses

4,970

4,393

Cash and cash equivalents

9

1,302,084

1,172,450

TOTAL CURRENT ASSETS

2,478,992

2,331,676

TOTAL ASSETS

25,719,762

24,384,202

Financial Report at 31 December 2019

3

COVIVIO

Liabilities

Note

31/12/19

31/12/18

3.2.5

Capital

261,660

248,709

Share premium account

3,882,299

3,553,687

Treasury shares

-15,255

-18,628

Consolidated reserves

3,421,954

3,028,104

Net income

746,987

749,574

TOTAL GROUP'S SHAREHOLDERS' EQUITY

10

8,297,645

7,561,446

Non-controlling interests

4,060,698

3,796,969

TOTAL SHAREHOLDERS' EQUITY

12,358,343

11,358,414

Long-term borrowings

11.2

9,071,820

9,216,624

Long-term rental liabilities

11.6

255,295

163,281

Long-term derivatives

11.5

287,319

155,945

Deferred tax liabilities

4

983,566

844,005

Staff termination benefits

12.2

56,364

49,248

Other long-term liabilities

19,433

21,199

TOTAL NON-CURRENT LIABILITIES

10,673,797

10,450,302

Liabilities held for sale

0

0

Trade payables

140,670

129,990

Trade payables on fixed assets

88,142

83,189

Short-term borrowings

11.2

1,815,746

1,843,103

Short-term rental liabilities

11.6

13,797

376

Short-term derivatives

11.5

78,523

79,052

Security deposits

5,483

5,557

Advances and pre-payments received

200,336

170,928

Short-term provisions

12.2

17,445

22,610

Current taxes

41,054

32,598

Other short-term liabilities

13

211,837

149,624

Pre-booked income

74,590

58,461

TOTAL CURRENT LIABILITIES

2,687,622

2,575,486

TOTAL LIABILITIES

25,719,762

24,384,202

Financial Report at 31 December 2019

4

COVIVIO

3.1.2 STATEMENT OF NET INCOME

€ thousand

Note

31/12/2019

31/12/2018

3.2.

Rental income

6.2.1

961 320

955 891

Unrecovered rental costs

6.2.2

-37 007

-31 945

Expenses on properties

6.2.2

-30 951

-36 915

Net losses on unrecoverable receivables

6.2.2

-4 550

-3 200

NET RENTAL INCOME

888 813

883 831

Revenues from hotel operating activity & Flex Office

243 223

257 308

Expenses of hotel operating activity & Flex Office

-168 170

-181 477

EBITDA from hotel operating activity & Flex Office

6.2.3

75 053

75 831

Income from other activities

6.2.3

16 825

4 792

Management and administration income

23 018

20 042

Business expenses

-5 648

-6 140

Overheads (1)

-127 409

-128 393

Development costs (not capitalised)

-1 819

-585

NET OPERATING COSTS

6.2.4

-111 859

-115 076

Depreciation of operating assets

6.2.5

-65 004

-60 120

Net change in provisions and other

6.2.5

12 830

6 277

CURRENT OPERATING INCOME

816 658

795 535

Net income from inventory properties

-5 787

-1 087

Income from asset disposals

6.3

1 066

97 423

Income from value adjustments

6.4

1 003 634

620 693

Income from disposal of securities

7 724

119 315

Income from changes in scope

6.5

-22 255

-160 006

OPERATING INCOME

1 801 040

1 471 872

Income from non-consolidated companies

4

0

Cost of net financial debt (2)

6.6

-210 166

-202 453

The interest cost for rental liabilities

5.11.6

-13 526

-4 594

Value adjustment on derivatives

6.7

-196 383

-16 152

Discounting of liabilities and receivables (1)

6.7

-173

-656

Exceptional depreciation of loan issue costs (2)

6.7

-10 646

-11 251

Share in income of equity affiliates

5.3.2

29 301

22 828

PRE-TAX NET INCOME

1 399 450

1 259 594

Deferred tax liabilities

6.8.2

-113 640

-90 050

Corporate taxes

6.8.2

-23 995

-26 081

NET INCOME FOR THE PERIOD

1 261 815

1 143 462

Net income from non-controlling interests

-514 828

-393 888

NET INCOME FOR THE PERIOD - GROUP SHARE

746 987

749 574

Group net income per share (€)

7.2

8,76

9,99

Group diluted net income per share (€)

7.2

8,61

9,22

  1. The free share expense included in the item Discounting of liabilities and receivables at 31 December 2018 in the amount of €8,802k is now included with personnel expenses under Overheads (€9,701 k as of 31 December 2019).
  2. €14,484 k in regular depreciation in the costs of debt issuance included in the item Depreciation of debt issuance costs at 31 December 2018 is now included in the line Cost of the net financial debt (€13,920 k at 31 December 2019).

Financial Report at 31 December 2019

5

COVIVIO

3.1.3 STATEMENT OF COMPREHENSIVE INCOME

31/12/2019

31/12/2018

NET INCOME FOR THE PERIOD

1 261 815

1 143 462

Other items in the comprehensive income statement recognised

directly in shareholders' equity and:

  • Destined for subsequent reclassification in the "Net income" section of the income statement

Actuarial losses on employee benefits

0

0

Currency translation differences

8 289

-3 026

Change in the fair value of operating assets held in investments

0

0

Effective portion of gains or losses on hedging instruments

5 025

-7 507

Tax on other items of comprehensive income

0

0

- Not destined for subsequent reclassification in the "Net income" section

0

0

OTHER ITEMS OF COMPREHENSIVE INCOME

13 314

-10 533

TOTAL COMPREHENSIVE INCOME FOR THE PERIOD

1 275 129

1 132 929

TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE

To the ow ners of the parent company

762 052

744 124

To non-controlling interests

513 077

388 805

*

TOTAL COMPREHENSIVE INCOME FOR THE PERIOD

1 275 129

1 132 929

GROUP NET COMPREHENSIVE PER SHARE

8,94

9,92

GROUP DILUTED NET INCOME (LOSS) PER SHARE

8,78

9,16

Financial Report at 31 December 2019

6

COVIVIO

3.1.4 STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

The Covivio share capital was 87,219,906 shares issued and fully paid up each with a par value of €3, i.e. €261.7 million at 31 December 2019. Covivio holds 174,557 treasury shares.

Gains and

Share

Reserves

losses

Total Group

Non-

Treasury

recognised

€ thousand

Capital

premium

and retained

Shareholder

controlling

Total equity

shares

directly in

account

earnings

s' equity

interests

shareholders'

equity

Position at 31 December 2017

224 490

2 853 696

-4 743

3 311 517

-21 653

6 363 307

3 804 352

10 167 659

Dividends distribution

-337 030

-337 030

-235 122

-572 152

Capital increase

23 675

702 902

726 577

726 577

Allocation to the legal reserve

544

-2 911

2 367

0

0

Other

-13 885

-461

-14 346

-280

-14 626

Total comprehensive income for the period

749 574

-5 450

744 124

388 805

1 132 929

Of which currency transaction gains and losses

-1 280

-1 280

-1 746

-3 026

Of which effective portion of gains or losses on hedging instruments

-4 170

-4 170

-3 337

-7 507

Of which net income (loss)

749 574

749 574

393 888

1 143 462

Impact of change in shareholding/Capital increase

71 056

71 056

-160 786

-89 730

Shared-based payments

7 757

7 757

7 757

Position at 31 December 2018

248 709

3 553 687

-18 628

3 804 781

-27 103

7 561 446

3 796 969

11 358 414

Dividends distribution

-382 076

-382 076

-247 668

-629 744

Capital increase

12 551

330 268

342 819

342 819

Allocation to the legal reserve

-1 256

1 256

0

0

Other

400

-400

3 373

-3 753

-380

76

-304

Total comprehensive income for the period

746 987

15 065

762 052

513 077

1 275 130

Of which actuarial gains and losses on retirement benefits

0

0

Of which currency transaction gains and losses

5 503

5 503

2 786

8 289

Of which effective portion of gains or losses on hedging instruments

9 562

9 562

-4 537

5 025

Of which net income (loss)

746 987

746 987

514 828

1 261 815

Impact of change in shareholding/Capital increase

5 656

5 656

-1 756

3 900

Shared-based payments

8 129

8 129

8 129

Position at 31 December 2019

261 660

3 882 299

-15 255

4 180 980

-12 038

8 297 646

4 060 698

12 358 343

The dividend of €382 million was paid as €316 million in shares and €66 million in cash and was withheld from net income and charged to retained earnings.

During 2019, Covivio increased its share capital by almost €343 million through the issue of 3,885,719 shares following the payment of the dividend as shares, and the issue of 298,053 new shares following the conversion of 1,670,419 bonds and the allocation of 133,236 vested free shares.

Reserves correspond to parent company retained earnings and reserves, together with reserves from consolidation.

Changes in the number of shares during the period

Transaction

Shares

Treasury

Shares

issued

shares

outstanding

Number of shares at 31 December 2018

82,902,898

222,461

82,680,437

Capital increase - delivery of free share plan

133,236

Capital increase - conversion of ORNANE-type bonds

298,053

Capital increase - dividend in shares

3,885,719

Treasury shares - liquidity agreement

-25,672

Treasury shares - employee award

-22,232

Number of shares at 31 December 2019

87,219,906

174,557

87,045,349

Change in non-controlling interests (+€263.7 million) was mainly due to the income for minority interests (+€513.1 million) and distributions during the period (-€247.6 million).

Financial Report at 31 December 2019

7

COVIVIO

3.1.5 STATEMENT OF CASH FLOWS

(€K)

Note

31-Dec-201931-Dec-2018

0

Net consolidated income (including minority interests)

Net depreciation and amortisation charges and provisions (1) (excluding those related to current assets)

Unrealised gains and losses relating to changes in fair value

Income and expenses calculated on stock options and related share-based payments Other calculated income and expenses

Gains or losses on disposals

Gains or losses from dilution - accretion

Share of income from companies accounted for under the equity method

Cash flow after tax and cost of net financial debt

Cost of net financial debt

Income tax expense (including deferred taxes)

Cash flow before tax and cost of net financial debt

Taxes paid

Change in w orking capital requirements on continuing operations (including employee benefits liabilities)

NET CASH FLOW GENERATED BY THE ACTIVITY

Impact of changes in the scope (2)

Disbursements related to acquisition of tangible and intangible fixed assets Proceeds relating to the disposal of tangible and intangible fixed assets Disbursements relating to acquisition of financial assets (non-consolidated securities) Proceeds relating to the disposal of financial assets (non-consolidated securities)

Dividends received (companies accounted for under the equity method, non-consolidated securities) Change in loans and advances granted

Investment grants received

Other cash flow from investment activities

NET CASH FLOW FROM INVESTMENT OPERATIONS

1 261 815

1 143 462

73 176

194 514

3.2.5.11.5

-807 278

-604 530

& 3.2.6.4

9 701

8 802

17 100

23 421

-8 810

-226 326

0

-0

-29 301

-22 828

516 502

516 515

3.2.6.6 &

209 672

187 970

3.2.6.7

3.2.6.8.2

137 635

116 132

863 810

820 617

-14 496

-17 375

3.2.5.7.2

-75 876

81 069

773 438

884 310

-246 910

-475 832

3.2.5.1.2

-674 244

-991 339

3.2.5.1.2

1 198 601

1 267 019

-2 684

-0

5 085

1 185

15 066

10 656

-54 528

71 227

0

0

3 220

11 218

243 607

-105 866

Impact of changes in the scope

0

-97 543

Amounts received from shareholders in connection w ith capital increases:

Paid by parent company shareholders

3.1.4

0

174 183

Paid by minority shareholders of consolidated companies

22 254

0

Purchases and sales of treasury shares

2 544

-15 675

Dividends paid during the reporting period:

Dividends paid to parent company shareholders

3.1.4

-66 426

-337 030

Dividends paid to non-controlling interests of consolidated companies

3.1.4

-247 668

-235 122

Proceeds related to new borrow ings

3.2.5.11.2

1 612 701

2 427 876

Repayments of borrow ings (including finance lease agreements)

3.2.5.11.2

-1 935 543

-2 507 114

Net interest paid (including finance lease agreements)

-216 191

-208 220

Other cash flow from financing activities

-75 547

-68 958

NET CASH FLOW FROM FINANCING OPERATIONS

-903 876

-867 602

Impact of changes in the exchange rate

535

-64

Impact of changes in accounting policies

0

0

CHANGE IN NET CASH

113 705

-89 222

Opening cash position

1 167 517

1 256 739

Closing cash position

1 281 221

1 167 517

Change in cash and cash equivalents

113 705

-89 222

31-Dec-2019

31-Dec-2018

Gross cash (a)

3.2.5.9.2

1 302 084

1 172 450

Debit balances and bank overdrafts from continuing operations (b)

3.2.5.11.2

-20 548

-1 398

Net cash and cash equivalents (c) = (a) - (b)

1 281 536

1 171 052

Of which available net cash and cash equivalents

1 281 221

1 167 517

Of which unavailable net cash and cash equivalents

315

3 535

Gross debt (d)

3.2.5.11.2

10 936 766

11 144 032

Amortisation of financing costs (e)

3.2.5.11.2

-69 749

-85 703

Net debt (d) - (c) + ( e )

9 585 482

9 887 278

  1. Net depreciation and amortisation charges and provisions of €73.2 million mainly include €65 million in depreciation and amortisation of tangible and intangible fixed assets.
    1. The impact of changes in the scope of investing activities (section 39 of IAS 7) amounting to -€246.9 million mainly stem from Hotels Europe (-€215.5 million) and Germany Residential (-€31.5 million).

Financial Report at 31 December 2019

8

COVIVIO

3.2 NOTES TO THE CONSOLIDATED ACCOUNTS

3.2.1 GENERAL PRINCIPLES

3.2.1.1 Accounting standards

The consolidated accounts of the Covivio Group at 31 December 2019 were prepared in accordance with the international accounting standards and interpretations issued by the International Accounting Standards Board (IASB) and adopted by the European Union as of the preparation date. These standards include the IFRS (International Financial Reporting Standards) and IAS (International Accounting Standards) and their interpretations.

The financial statements were approved by the Board of Directors on 13 February 2020.

  • Accounting principles and methods used

The accounting principles applied for the consolidated accounts as at 31 December 2019 are identical to those used for the consolidated accounts as at 31 December 2018, except for new standards and amendments whose application was mandatory on or after 1 January 2019 and which were not applied early by the Group.

The new standards subject to mandatory application on or after 1 January 2019 include:

  • IFRS 16 "Leases", adopted by the European Union on 31 October 2017; this standard supersedes IAS 17 "Leases", as well as the corresponding interpretations (IFRIC 4, SIC 15 and SIC 27). It sets out the principles applicable to the accounting, measurement and presentation of leases.
    The information required as part of the transition to and first-time application of IFRS 16 are presented in section 3.2.1.2.
    The following interpretations and amendments, which are mandatory as of 1 January 2019, did not have any impact on the Group's consolidated financial statements:
  • Amendment to IFRS 9 "Prepayment Features with Negative Compensation", adopted by the European Union on 22 March 2018; this amendment deals with instruments containing a prepayment clause when the exercise of this clause leads to a repayment of less than the amount of the principal and interest on the principal amount outstanding (negative compensation);
  • IFRIC 23 "Uncertainty over Income Tax Treatments", adopted by the European Union on 23 October 2018; this interpretation clarifies the application of provisions of IAS 12 "Income Taxes" to the recognition and measurement where there is uncertainty on the income tax treatment;
  • Amendments to IAS 28 "Investments in Associates and Joint Ventures", adopted by the European Union on 8 February 2019;
  • Annual improvements to IFRS (2015-2017 cycle), adopted by the European Union on 14 March
    2019. These improvements amend IFRS 3 "Business Combinations", IFRS 11 "Partnerships", IAS 23 "Borrowing Costs" and IAS 12 "Income Taxes";
  • Amendments to IAS 19 "Plan Amendment, Curtailment or Settlement", adopted by the European Union on 13 March 2019. These limited amendments apply to changes, curtailment or settlement of defined-benefit plans.

The new amendments and standards adopted by the European Union whose application was not mandatory on 1 January 2019 and which are not being applied early by the Covivio Group are the following:

  • Amendments to IAS 1 and IAS 8 "Definition of Material", adopted by the European Union on 29 November 2019. According to the IASB, the amendments will come into force on 1 January 2020.

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  • Amendments to IFRS 9, IAS 39 and IFRS 7 related to the interbank benchmark rate reform, published on 26 September 2019, adopted by the European Union on 15 January 2020; According to the IASB, the amendments will come into force on 1 January 2020.

New standards awaiting adoption by the European Union, whose application is possible as of 1 January 2019:

  • Amendment to IFRS 3 "Definition of a Business", published on 22 October 2018; according to the IASB, the amendments will come into force on 1 January 2020;
  • Amendments to IFRS 10 and IAS 28 "Sales or contributions of assets made between the Group and equity affiliates", published on 11 September 2014.

IFRS standards and amendments published by the IASB not authorised for financial years beginning on or after 1 January 2019:

  • Amendments to References to the conceptual framework in IFRS Standards issued on 29 March 2018; these were adopted by the European Union on 29 November 2019. According to the IASB, the amendments will come into force on 1 January 2020;
  • IFRS 17 "Insurance contracts", published on 18 May 2017; according to the IASB, the amendments will come into force on 1 January 2021. IFRS 17 lays out the principles as to the recognition, valuation, presentation and disclosures concerning insurance contracts within the scope of application of the standard. This standard has no impact on the financial statements.

3.2.1.2 First-time application of IFRS 16

The Covivio Group has chosen to apply IFRS 16 using the simplified retrospective method: comparative information is not restated and the cumulative impact of the first-time application of the standard is presented as an adjustment to shareholders' equity at 1 January 2019. In this case, no adjustments have been recorded in shareholders' equity at the date of first-time application.

Pursuant to section 5 of the standard, the Covivio Group has chosen not to restate leases with a residual term at the date of first-time application not exceeding 12 months and leases where the underlying asset has a low value.

The discount rate used to calculate the lease liability is the marginal interest rate on debt at the date of first-time application or at the lease commencement date. This rate is defined as the rate of interest that a lessee would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the leased asset in a similar economic environment.

For leases with a residual term of more than 15 years (construction leases and long-term leases conferring ad rem rights), the rates used are obtained by adding a risk-free rate applicable to the currency and the term, a credit spread, a EUR/GBP rate for assets located in the United Kingdom and a surcharge applicable to real estate assets.

For leases with a residual term of less than 15 years at the date of first-time application, the discount rate used corresponds to the average interest rate on debt for the business segment in question at 31 December 2018 (i.e. 2.08% for the Hotels in Europe segment, 1.5% for Germany Residential and 1.53% for France Offices, Italy Offices and Corporate).

The average yield rate weighted for rental liabilities at 1 January 2019 is 4.20%.

The Group has used the following presentation in the Statement of financial position:

  • right-of-useassets meeting the definition of investment properties under IAS 40, for which the Group applies the fair value model, are included under Investment properties;
  • right-of-useassets that do not meet the definition of investment properties under IAS40, are included under the items where the corresponding underlying assets are presented if they belonged thereto, namely the items Operating properties and Other tangible fixed assets;
  • rental liabilities are presented separately from other liabilities under Long-term rental liabilities and Short-term rental liabilities.

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The Group's leases are mainly leases for business premises, company vehicles, parking spaces, construction leases and long-term leases conferring ad rem rights.

Note that IAS 40 "Investment properties" already incorporated a restatement similar to IFRS 16 for construction leases described as finance leases. Accordingly, long-term leases conferring ad rem rights relating to acquisitions in the United Kingdom during the fiscal year had already been restated in the financial statements at 31 December 2018. The first-time application of IFRS 16 is consequently limited to leases other than long-term leases conferring ad rem rights.

The IAS 17 rental commitments at 31 December 2018 and rental debt recognised at 1 January 2019 are reconciled in the table below (in €K):

Operating lease commitments as tenant at 31 December 2018

81,801

Contracts not accounted for under exemptions

-

12,623

Unidentified contracts at 31 December 2018

98,989

Undiscounted rental commitments under IFRS 16 at 1 January 2019

168,167

Effect of discounting

-

78,739

Discounted rental liabilities under IFRS 16 at 1 January 2019

89,428

Rental liabilities recognised under IFRS 40 at 31 December 2018

163,657

Rental liabilities under IFRS 16 at 1 January 2019

253,085

The impact of the first-time application of IFRS 16 on Statement of financial position items at 31 December 2019 is presented in the following tables:

Total impact 1st application IFRS 16

France

Hotels in

Germany

France

Corporate

K€

Italy Offices

and not

Total 1st jan.-19

31/12/2018

31/12/2019

Offices

Europe

Residential

Residential

attributable

Tangible fixed assets

8 339

3 505

29 034

601

21

35 907

77 407

0

65 838

Operating properties

8 235

3 340

27 585

0

12

35 881

75 053

0

63 749

Other tangible fixed assets

104

165

1 449

601

9

26

2 354

0

2 089

Investment properties

0

0

12 035

0

0

0

12 035

163 660

202 636

TOTAL ASSETS

8 339

3 505

41 069

601

21

35 907

89 442

163 660

268 474

Total impact 1st application IFRS 16

France

Hotels in

Germany

France

Corporate

K€

Italy Offices

and not

Total 1st jan.-19

31/12/2018

31/12/2019

Offices

Europe

Residential

Residential

attributable

Rental liabilities

8,336

3,500

41,063

601

21

35,907

89,428

163,657

268,977

Long-term rental liabilities

4,687

2,769

39,436

375

12

29,835

77,114

163,281

255,295

Short-term rental liabilities

3,649

731

1,627

226

9

6,072

12,314

376

13,682

TOTAL LIABILITIES

8,336

3,500

41,063

601

21

35,907

89,428

163,657

268,977

The impact of the first-time application of IFRS 16 on Statement of net income items at 31 December

2019 is presented in the following table:

K€

31/12/2019

Net change in provisions and other

9 198

Expenses of hotel operating activity

2 548

Net cost of operations

6 375

Net operating costs

5 062

Amortisation and depreciation of tangible assets

-12 699

Changes in FV of use rights/investment properties

3 107

Interest cost for rental liabilities

-13 528

IFRS 16 impact on net income

63

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3.2.1.3 Estimates and judgements

The financial statements have been prepared in accordance with the historic cost convention, with the exception of investment properties and certain financial instruments, which were recognised in accordance with the fair value convention. In accordance with the conceptual framework for IFRS, preparation of the financial statements requires making estimates and using assumptions that affect the amounts shown in these financial statements.

The significant estimates made by the Covivio Group in preparing the financial statements mainly relate to:

  • the valuations used for testing impairment, in particular assessing the recoverable value of goodwill and intangible fixed assets;
  • measurement of the fair value of investment properties;
  • assessment of the fair value of derivative financial instruments;
  • measurement of provisions.

Due to the uncertainties inherent in any valuation process, the Covivio Group reviews its estimates based on regularly updated information. The future results of the transactions in question may differ from these estimates.

In addition to the use of estimates, Group management makes use of judgements to define the appropriate accounting treatment of certain business activities and transactions when the IFRS standards and interpretations in effect do not precisely address the accounting issues involved.

3.2.1.4 Operating segments

The operating segments of the Covivio Group are detailed in paragraph 3.2.8.1.

3.2.1.5 IFRS 7 - Reference table

Liquidity risk

§ 3.2.2.2

Financial expense sensitivity

§ 3.2.2.3

Credit risk

§ 3.2.2.4

Market risk

§ 3.2.2.6

Exchange rate risk

§ 3.2.2.7

Sensitivity of the fair value of investment properties

§ 3.2.5.1.3

Covenants

§ 3.2.5.11.7

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3.2.2 FINANCIAL RISK MANAGEMENT

The operating and financial activities of the Company are exposed to the following risks:

3.2.2.1 Marketing risk for properties under development

The Group is involved in property development. As such, it is exposed to a number of different risks, particularly risks associated with construction costs, completion delays and the marketing of properties. These risks can be assessed in light of the schedule of properties under development (see § 3.2.5.1.5).

3.2.2.2 Liquidity risk

Liquidity risk is managed in the medium and long term with multi-year cash management plans and, in the short term, by using confirmed and undrawn lines of credit. At 31 December 2019, the Covivio Group's available cash and cash equivalents amounted to €2,963 million, including €1,505 million in usable unconditional credit lines, €1,302 million in investments and €156 million in unused overdraft facilities.

The graph below summarises the maturities of borrowings (in €M) existing as at 31 December 2019:

  1. 500
  1. 000
  1. 500
  1. 000
    500

0

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029 and over

Interests

The maturities at 31 December 2019 in the graph above include €1,363.9 million in treasury bills.

The amount of interest payable until the maturity of the debt, estimated on the basis of the outstanding amount at 31 December 2019 and the average interest rate on debt, totalled €841 million.

Details of the debt maturities are provided in note 3.2.5.11.3, and a description of the banking covenants and accelerated payment clauses included in the loan agreements is presented in note 3.2.5.11.7.

Throughout 2019, the Group continued its policy of reducing the cost of its debt whilst extending the term, particularly by refinancing or renegotiating some of its debts following the merging of its French and Italian scopes.

  • In 2019, Covivio raised or renegotiated €550 million in loans on improved financial and maturity terms, for example, €500 million via a 12-year green bond issued in September 2019, with a 1.125% coupon. At the same time, Covivio cancelled or redeemed early €817.5 million in credit lines, short and medium-term borrowings or bonds, mainly in Italy.
  • Covivio Hotels raised, secured or renegotiated €577 million in long-term mortgage debt (average 9-year term) backed by Hotels in Spain, Germany and France, while repaying €400 million in medium-term mortgage financing.
  • In Germany, Covivio Immobilien SE raised or renegotiated €529 million in loans with average terms of around 10 years.

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3.2.2.3 Interest rate risk

The Group's exposure to the risk of changes in market interest rates is linked to its floating rate and long-term financial debt.

To the extent possible, bank debt is primarily hedged via financial instruments (see § 3.2.5.11.5). At 31 December 2019, after taking interest rate swaps into account, approximately 96% of the Group's debt was hedged, and the bulk of the remainder was covered by interest rate caps, which resulted in the following sensitivity to changes in interest rates:

The impact of a 100 bps rate increase as at 31 December 2019 is a loss of €18,733k on the 2020 Group Share of net income.

The impact of a 50 bps rate increase as at 31 December 2019 is a loss of €8,622k on the 2020 Group Share of net income.

The impact of a 50 bps rate reduction as at 31 December 2019 is an increase of €8,356k on the 2020 Group Share of net income.

3.2.2.4 Financial counterparty risk

Given the Covivio Group's contractual relationships with its financial partners, the Company is exposed to counterparty risk. If any of its counterparties is not in a position to honour its commitments, the Group's income could suffer an adverse effect.

This risk primarily involves the hedging instruments subscribed by the Group and which would have to be replaced by a hedging transaction at the current market rate in the event of a default by the counterparty.

The counterparty risk is limited by the fact that Covivio group is a borrower, from a structural standpoint. The risk is therefore mainly restricted to the investments made by the Group and to its counterparties in derivative product transactions. The Company continually monitors its exposure to financial counterparty risk. The Company's policy is to deal only with top-tier counterparties, while diversifying its financial partners and its sources of funding.

Counterparty risk is included in the measurement of cash instruments. It totalled €5,275k in 2019.

3.2.2.5 Leasing counterparty risk

Covivio Group's rental income is subject to a certain degree of concentration, to the extent that the principal tenants (Orange, Telecom Italia, AccorHotels, IHG and B&B) generate most of the annual rental income.

It should be noted that in 2017 and 2018, the Group split the Telecom Italia portfolio and now only holds 51%. The Group also made significant investments in Spain and the United Kingdom, thus diversifying its hotel tenants.

Covivio group does not believe it is significantly exposed to the risk of insolvency, since its tenants are selected based on their creditworthiness and the economic prospects of their market segments. The operating and financial performance of the main tenants is regularly reviewed. In addition, tenants grant the Group financial guarantees when leases are signed.

The Group has not recorded any significant overdue payments.

3.2.2.6 Risks related to changes in the value of the portfolio

Changes in the fair value of investment properties are recognised in the income statement. Changes in property values can thus have a material impact on the operating performance of the Group.

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In addition, part of the Company's operating income is generated by the sales plan, the income of which is equally dependent on property values and on the volume of possible transactions.

Rentals and property values are cyclical in nature, the duration of the cycles being variable but generally long-term. Different domestic markets have differing cycles that vary from each other in relation to specific economic and market conditions. Within each national market, prices also follow the cycle in different ways and with varying degrees of intensity, depending on the location and category of the assets.

The macroeconomic factors that have the greatest influence on property values and determine the various cyclical trends include the following:

  • interest rates;
  • the market liquidity and the availability of other profitable alternative investments;
  • economic growth.

Low interest rates, abundant liquidity on the market and a lack of profitable alternative investments generally lead to an increase in property asset values.

Economic growth generally increases demand for leased space and paves the way for rent levels to rise, particularly in Offices. These two consequences lead to an increase in the price of real estate assets. Nevertheless, in the medium term, economic growth generally leads to an increase in inflation and then an increase in interest rates, expanding the availability of profitable alternative investments. Such factors exert downward pressure on property values.

The investment policy of Covivio group is to minimise the impact of the various stages of the cycle by choosing investments that:

  • have long-term leases and high quality tenants, which soften the impact of a reduction in market rental income and the resulting decline in real estate prices;
  • are located in major city centres;
  • have low vacancy rates, in order to avoid the risk of having to re-let vacant space in an environment where demand may be limited.

The holding of real estate assets intended for leasing exposes the Covivio Group to the risk of fluctuation in the value of real estate assets and lease payments.

Despite the uncertainty created by the economic downturn, this exposure is limited to the extent that the rentals invoiced are derived from rental agreements, the term and diversification of which mitigate the effects of fluctuations in the rental market.

The sensitivity of the fair value of investment properties to changes in capitalisation rates is analysed in 3.2.5.1.3.

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3.2.2.7 Exchange rate risk

The Group operates both in and outside the euro zone following acquisition of the hotel properties in the United Kingdom and in Poland. The Group wanted to hedge against certain currency fluctuations (GBP) by financing part of the acquisitions through a foreign currency loan and a currency swap.

Impact of a decrease in the GBP/EUR exchange rate on the shareholders' equity

5% decrease

10% decrease

31/12/2019

in GBP/EUR

in GBP/EUR

(M£)

exchange rate

exchange rate

(€M)

(€M)

Portfolio

825

-45.7

-91.7

Debt

400

22.3

44.5

Cross currency sw ap

250

13.9

27.8

Impact on shareholders' equity

-9.6

-19.3

(-) corresponds to a loss; (+) corresponds to a gain

3.2.2.8 Brexit risk

Notwithstanding the impact on real estate valuations relating to economic uncertainties, in the United Kingdom the Group is benefiting from the minimum guaranteed rental income over its whole portfolio limiting the impact of this risk on its financial position and profitability.

3.2.2.9 Risks related to changes in the value of shares and bonds

The Group is exposed to risks for two classes of shares (see § 3.2.5.2.2).

This risk primarily involves listed securities in companies consolidated according to the equity method, which are valued according to their value in use. Value in use is determined based on independent assessments of the real estate assets and financial instruments.

Furthermore, Covivio issued bonds (ORNANE type) valued at their fair value in the income statement at each reporting date for ORNANE France 2019 and by distinguishing a financial debt and amortised cost and a derivative value at fair value for ORNANE Italy 2021. The fair value corresponds to the bond's closing price, exposing the Group to changes in the bond's value. The specific features of the ORNANE are described in note 3.2.5.11.4. The France 2019 ORNANE was fully redeemed in early 2019.

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3.2.2.10 Tax environment

3.2.2.10.1 Changes in the French tax environment

The French tax environment has undergone changes in the corporate tax rate, which has been reduced to 31% (instead of 33.1/3%) from 1 January 2019 for companies with revenues not exceeding €250 million.

New rules to limit the deductibility of interest to 30% of fiscal EBITDA or €3 million, pursuant to the application of European provisions, could have an influence on the taxable income of Group companies.

3.2.2.10.2 Changes in the Italian tax environment

The Group has not observed any significant change in the Italian tax environment.

3.2.2.10.3 Changes in the German tax environment

The Group has not observed any significant change in the German tax environment.

3.2.2.10.4 Tax risks

Due to the complexity and bureaucracy characteristic of the environment in which the Covivio Group operates, the Group is exposed to tax risks. If our counsel believes that an adjustment presents a risk of reassessment, a provision is made. The list of the main ongoing proceedings includes the following:

  • Covivio Hotels' tax audit
    Covivio Hotels' financial statements were audited for the 2010/2011 and 2012/2013/2014 fiscal years, which resulted in a reassessment proposal for the CVAE in the amount of €2.4 million and €2.2 million respectively. These reassessments were partially withdrawn by the tax administration in the first quarter of 2018 and refunds of €1.2 million and €1.1 million were obtained. The remaining balance of the reassessment of €1.2 million and €1.1 million is being contested before the Administrative Court following the court's two rulings against the Company. Based on the analysis by the company's legal counsel, these disputes were not provisioned as at 31 December 2019.
    The financial statements of Covivio Hotels were also audited for the 2015 fiscal year which resulted in a reassessment proposal for corporate value-added tax (CVAE), on the same grounds as the previous reassessment proposals for €0.2 million. This proposal was contested at the Administrative Court and, based on the analysis by the Company's advisers, is not recognised in the accounts at 31 December 2019.
  • Foncière Otello tax audit (subsidiary of Covivio Hotels)
    Foncière Otello's financial statements were audited for the 2011, 2012 and 2013 fiscal years, which resulted in a reassessment proposal for the CVAE in the amount of €0.5 million. This proposal is being contested before the Administrative Court following this court's ruling against the Company. Based on the analysis by the company's legal counsel, no provision has been recorded for this dispute as at 31 December 2019.
    The financial statements of Foncière Otello were also audited for the 2014, 2015 and 2016 fiscal years, which resulted in a reassessment proposal for corporate value added tax (CVAE) in the amount of €0.2 million, on the same grounds as the previous reassessment proposal. This proposal is being contested in its entirety, and, based on analysis by the company's legal counsel, no provision was recorded to that effect as at 31 December 2019.

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  • Tax audit of LHM Propco Lux (subsidiary of Covivio Hotels)
    A company with assets in Germany is being audited for the 2015-2017 fiscal years, which remains ongoing at 31 December 2019.
  • Tax audits of Operating properties
    Nice-M was audited for fiscal years 2015 and 2016, which resulted in a VAT reassessment in the amount of €31k, which is contested in part. This VAT reassessment has not been recognised at 31 December 2019.
    Two German companies (Rock portfolio) are subject to a tax audit for the 2012 through 2015 financial years, concerning corporate tax and VAT.
    Another tax audit relating to VAT for 2018 was begun in early 2019 and remains ongoing.
  • Tax audits of Germany Residential
    Covivio Immobilien and all its subsidiaries were subject to a tax audit for financial years 2011 to 2016.
    At 31 December 2019, the audit is still ongoing, with the exception of the Golddust portfolio which resulted in a reassessment of around €1 million as the level of interest rates on pre- existing partner loans on acquisition of the companies' securities was questioned. This reassessment, which resulted in a provision of €1.5 million, was accepted and was permanently closed at 31 December 2019.
  • Tax audits on Beni Stabili, which merged with Covivio Comit Fund tax dispute - Beni Stabili:
    On 17 April 2012, following a court decision, the Italian tax administration refunded the debt borne by Beni Stabili for the Comit Fund dispute (principal: €58.2 million and interest: €2.3 million). In April 2012, the Tax Administration appealed this decision. The Court of Appeal ruled in favour of the Tax Administration on 18 December 2015.
    The dispute with the tax authorities was settled with the payment of €55 million. The €56.2 million provision recorded in 2015 was reversed as at 31 December 2016.
    However, Comit Fund and Beni Stabili have not entered into a joint agreement to definitively agree that they each will pay an equal share of this adjustment. Civil arbitration proceedings taken by Comit Fund confirmed that each party accepts to pay 50% of the cost of the dispute, in accordance with the payments made. In January 2019, Comit Fund appealed against the arbitration decision bringing the dispute to an end. In May 2019, an appeal was heard, resulting in a new hearing being scheduled for November 2019. Beni Stabili's management, supported by its advisers, believes there is little risk of having to repay Comit Fund, and no provision has therefore been made for this appeal as of 31 December 2019.

3.2.2.10.5 Deferred tax liabilities

Most of the Group's real estate companies have opted for the SIIC regime in France, and the SOCIMI regime in Spain. Beni Stabili, which opted for the SIIQ regime, changed its tax regime when it merged with Covivio at 31 December 2018 and the Covivio permanent establishment in Italy will be subject to real estate corporate tax of 20% as of 1 January 2019. The impact of deferred tax liabilities is therefore essentially present in Germany Residential and Italy Offices and linked to investments in Hotels in Europe for which the SIIC regime is not applicable (Germany, Spain, Belgium, Netherlands, Portugal, the United Kingdom and Poland). In the case of Spain, all Spanish companies have opted for the SOCIMI regime exemption. However, there are deferred tax liabilities related to assets held by the companies prior to opting for SOCIMI treatment.

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The deferred tax is mainly due to the recognition of the portfolio's fair value (German rate: 15.825%,

French rate: 25.83%). Please note that the hotel businesses are taxed at a rate of between 30.18% and 32.28% in Germany and that deferred tax liabilities for this business have also been recognised at this rate.

3.2.3 SCOPE OF CONSOLIDATION

3.2.3.1 Accounting principles applicable to the scope of consolidation

  • Consolidated subsidiaries and structured entities - IFRS 10

These financial statements include the financial statements of Covivio and the financial statements of the entities (including structured entities) that it controls and its subsidiaries.

Covivio group has control when it:

  • has power over the issuing entity;
  • is exposed or is entitled to variable returns due to its ties with the issuing entity;
  • has the ability to exercise its power in such as manner as to affect the amount of returns that it receives.

Covivio group must reassess whether it controls the issuing entity when facts and circumstances indicate that one or more of the three factors of control listed above have changed.

A structured entity is an entity structured in such a way that the voting rights or similar rights do not represent the determining factor in establishing control of the entity; this is particularly the case when the voting rights only involve administrative tasks and the relevant business activities are governed by contractual agreements.

If the Group does not hold a majority of the voting rights in an issuing entity in order to determine the power exercised over an entity, it analyses whether it has sufficient rights to unilaterally manage the issuing entity's relevant business activities. The Group takes into consideration any facts and circumstances when it evaluates whether the voting rights that it holds in the issuing entity are sufficient to confer power to the Group, including the following:

  • the number of voting rights that the Group holds compared to the number of rights held respectively by the other holders of voting rights and their distribution;
  • the potential voting rights held by the Group, other holders of voting rights or other parties;
  • the rights under other contractual agreements;
  • the other facts and circumstances, where applicable, which indicate that the Group has or does not have the actual ability to manage relevant business activities at the moment when decisions must be made, including voting patterns during previous shareholders' meetings.

Subsidiaries and structured entities are fully consolidated.

  • Equity affiliates - IAS 28

An equity affiliate is an entity in which the Group has significant control. Significant control is the power to participate in decisions relating to the financial and operational policy of an issuing entity without, however, exercising control or joint control on these policies.

The results and the assets and liabilities of equity affiliates are recognised in these consolidated financial statements according to the equity method.

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  • Partnerships (joint control) - IFRS 11

Joint control means the contractual agreement to share the control exercised over a company, which only exists in the event where the decisions concerning relevant business activities require the unanimous consent of the parties sharing the control.

  • Joint ventures

A joint venture is a partnership in which the parties which exercise joint control over the entity have rights to its net assets.

The results and the assets and liabilities of joint ventures are recognised in these consolidated financial statements according to the equity method.

  • Joint operations

A joint operation is a partnership in which the parties exercising joint control over the operation have rights to the assets, and obligations for the liabilities relating to it. Those parties are called joint operators.

A joint operator must recognise the following items relating to its interest in the joint operation:

  • its assets, including its proportionate share of assets held jointly, where applicable;
  • its liabilities, including its proportionate share of liabilities undertaken jointly, where applicable;
  • the income that it derived from the sale of its proportionate share in the yield generated by the joint operation;
  • its proportionate share of income from the sale of the yield generated by the joint operation;
  • the expenses that it has committed, including its proportionate share of expenses committed jointly, where applicable.

The joint operator accounts for the assets, liabilities, income and expenses pertaining to its interests in a joint operation in accordance with the IFRS that apply to these assets, liabilities, income and expenses.

No Group company is considered to constitute a joint operation.

3.2.3.2 Additions to the scope of consolidation

Additions to the scope of consolidation for each business are presented in the scope reporting table detailed by company at the start of each segment. The segments concerned are France Offices, Italy Offices, Hotels in Europe and Germany Residential.

3.2.3.3 Internal restructuring/Disposals

Removals from the scope of consolidation for each business are presented in the scope reporting table detailed by company at the end of each segment. The segments concerned are France Offices, Italy Offices, Hotels in Europe, Germany Residential and the Others sector.

3.2.3.4 Change in holding and/or in consolidation method

  • Contributions of Covivio shares to SCI Ruhl - Impact on shareholding ratio

Covivio contributed all 100 shares that it held in Ruhl Côte d'Azur SCI, together with a receivable of €10.5 million. 2,365,503 new shares were issued in consideration for Covivio's contribution.

Covivio's investment in Covivio Hotels was thus increased from 42.30% to 43.22%.

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  • Repurchase of 25% of shares in Samoens - Impact on shareholding ratio

At the end of March 2019, Covivio Hotels proceeded with a capital increase through the creation of 613,244 new shares as compensation for 25% of shares in Samoens held by Caisse des Dépôts et Consignations. At 31 December 2019, Samoens was 50.10% directly held by Covivio Hotels, a Covivio subsidiary, compared with 25.10% at 31 December 2018.

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3.2.3.5 List of consolidated companies

Consolidation

Percentage

Percentage

97 companies in the France Offices segment

Country

method in

held in

held in 2019

2019

2018

Covivio

France

Parent

company

N2 Batignolles Promo

France

FC

50.00

6 rue Fructidor

France

FC

50.10

Fructipromo

France

FC

100.00

Jean Jacques Bosc

France

FC

100.00

Terres Neuves

France

FC

100.00

André Lavignolle

France

FC

100.00

SCCV Chartres avenue de Sully

France

FC

50.00

SCI de la Louisiane

France

FC

100.00

SCCV Bobigny Le 9ème Art

France

FC

60.00

SCCV Fontenay sous Bois Rabelais

France

FC

50.00

Covivio Ravinelle

France

FC

100.00

100.00

SCI Fédérimmo

France

FC

60.00

60.00

EURL Fédération

France

FC

100.00

100.00

SARL Foncière Margaux

France

FC

100.00

100.00

Covivio 2

France

FC

100.00

100.00

Covivio 4

France

FC

75.00

75.00

Euromarseille 1

France

EM/JV

50.00

50.00

Euromarseille 2

France

EM/JV

50.00

50.00

Euromarseille BI

France

EM/JV

50.00

50.00

Euromarseille BH

France

EM/JV

50.00

50.00

Euromarseille PK

France

EM/JV

50.00

50.00

Euromarseille Invest

France

EM/JV

50.00

50.00

Euromarseille H

France

EM/JV

50.00

50.00

Covivio 7

France

FC

100.00

100.00

SCI Bureaux Cœur d'Orly

France

EM/JV

50.00

50.00

SAS Cœur d'Orly Promotion

France

EM/JV

50.00

50.00

Technical

France

FC

100.00

100.00

Le Ponant 1986

France

FC

100.00

100.00

SCI Atlantis

France

FC

100.00

100.00

Iméfa 127

France

FC

100.00

100.00

SNC Latécoère

France

FC

50.10

50.10

SCI du 32 avenue P. Grenier

France

FC

100.00

100.00

SCI du 40 rue JJ. Rousseau

France

FC

100.00

100.00

SCI du 3 place A Chaussy

France

FC

100.00

100.00

SARL BGA Transactions

France

FC

100.00

100.00

SCI du 288 rue Duguesclin

France

FC

100.00

100.00

SCI du 9 rue des Cuirassiers

France

FC

50.10

50.10

SCI 35/37 rue Louis Guérin

France

FC

100.00

100.00

SCI du 15 rue des Cuirassiers

France

FC

50.10

50.10

SCI du 10B et 11 A 13 allée des Tanneurs

France

FC

100.00

100.00

SCI du 8 rue M. Paul

France

FC

100.00

100.00

SCI 1 rue de Chateaudun

France

FC

100.00

100.00

SCI du 1630 Avenue de la Croix Rouge

France

FC

100.00

100.00

SCI du 125 avenue du Brancolar

France

FC

100.00

100.00

SARL du 106-110 rue des Troënes

France

FC

100.00

100.00

SCI du 2 rue de L'Ill

France

FC

100.00

100.00

SCI du 20 avenue Victor Hugo

France

FC

100.00

100.00

SARL du 2 rue Saint Charles

France

FC

100.00

100.00

SNC Télimob Paris

France

FC

100.00

100.00

SNC Télimob Nord

France

FC

100.00

100.00

SNC Télimob Rhône Alpes

France

FC

100.00

100.00

SNC Télimob Sud Ouest

France

FC

100.00

100.00

SNC Télimob Est

France

FC

100.00

100.00

SNC Télimob Paca

France

FC

100.00

100.00

SNC Télimob Ouest

France

FC

100.00

100.00

SARL Télimob Paris

France

FC

100.00

100.00

Pompidou

France

FC

100.00

100.00

OPCI Office CB21

France

FC

75.00

75.00

11 place de l'Europe

France

FC

50.09

50.09

Lenovilla

France

EM/JV

50.10

50.10

Lenopromo

France

FC

100.00

100.00

SCI Latécoère 2

France

FC

50.10

50.10

Meudon Saulnier

France

FC

100.00

100.00

Charenton

France

FC

100.00

100.00

Latepromo

France

FC

100.00

100.00

SNC Promomurs

France

FC

100.00

100.00

FDR Participation

France

FC

100.00

100.00

SCI Avenue de la Marne

France

FC

100.00

100.00

Omega B

France

FC

100.00

100.00

SCI RUEL B2

France

FC

100.00

100.00

SCI Factor E

France

EM/EA

34.69

34.69

SCI Orianz

France

EM/EA

34.69

34.69

Financial Report at 31 December 2019

22

COVIVIO

Consolidatio

Percentag

Percentag

Companies France Offices Segment

Country

n method in

e held in

e held in

2019

2019

2018

Wellio

France

FC

100,00

100,00

Le Clos de Chanteloup

France

FC

100,00

100,00

Bordeaux Lac

France

FC

100,00

100,00

Sully Chartres

France

FC

100,00

100,00

Sucy Parc

France

FC

100,00

100,00

Gambetta Le Raincy

France

FC

100,00

100,00

Orly Promo

France

FC

100,00

100,00

Silex Promo

France

FC

100,00

100,00

21 Rue Jean Goujon

France

FC

100,00

100,00

Villouvette Saint-Germain

France

FC

100,00

100,00

La Mérina Fréjus

France

FC

100,00

100,00

Normandie Niemen Bobigny

France

FC

100,00

100,00

Le Printemps Sartrouville

France

FC

100,00

100,00

Gaugin St Ouen L'Aumône

France

FC

100,00

100,00

Cité Numérique

France

FC

100,00

100,00

Danton Malakoff

France

FC

100,00

100,00

Meudon Bellevue

France

FC

100,00

100,00

N2 Batignolles

France

FC

50,00

50,00

Tours Coty

France

FC

100,00

100,00

Valence Victor Hugo

France

FC

100,00

100,00

Nantes Talensac

France

FC

100,00

100,00

Marignane Saint-Pierre

France

FC

100,00

100,00

Palmer Plage SNC

France

FC

100,00

100,00

Dual Center

France

FC

100,00

100,00

25-27 quai Félix Faure

France

Merger

-

100,00

SCI du 682 cours de la Libération

France

Merger

-

100,00

SNC Commerces Cœur d'Orly

France

merged

-

50,00

Palmer Montpellier

France

merged

-

100,00

SCI RUEIL B3 B4

France

merged

-

100,00

The registered office of the parent company Covivio is located at 18 avenue François Mitterrand - 57000 Metz. The other fully consolidated subsidiaries in the France Offices segment have their registered office located at 10 and 30 avenue Kléber - 75116 Paris.

20 companies in the Italy Offices segment

Country

Consolidation

Percentage

Percentage

method in 2019

held in 2019

held in 2018

Covivio Attività Immobiliari 2 S.r.L.

Italy

FC

100.00

Covivio Attività Immobiliari 3 S.r.L.

Italy

FC

100.00

Beni Stabili 7 S.p.A.

Italy

FC

100.00

100.00

Central Società di Investimento per Azioni a capitalo fisso Central SICAF S.p.A.

Italy

FC

51.00

51.00

Beni Stabili Retail S.r.l.

Italy

FC

55.00

55.00

Covivio Development S.p.A.

Italy

FC

100.00

100.00

RGD Gestioni S.r.L.

Italy

FC

100.00

100.00

Real Estate Roma Olgiata S.r.L.

Italy

FC

75.00

75.00

Covivio Immobiliare 9 SINQ S.p.A.

Italy

FC

100.00

100.00

B.S. Engineering S.r.l.

Italy

FC

100.00

100.00

Wellio Italy

Italy

FC

100.00

100.00

Imser Securitisation S.r.L.

Italy

FC

100.00

100.00

Imser Securitisation 2 S.r.L.

Italy

FC

100.00

100.00

Revalo SpA

Italy

FC

100.00

100.00

Real Estate Solution & Technology

Italy

EM

30.00

30.00

Investire S.p.A. SGR

Italy

EM

17.90

17.90

Attivita Commerciali Montenero S.r.L.

Italy

FC

100.00

100.00

Attivita Commerciali Beinasco S.r.L.

Italy

FC

100.00

100.00

Attivita Commerciali Vigevano S.r.L.

Italy

FC

100.00

100.00

Covivio Attività Immobiliari 1 S.r.L.

Italy

FC

100.00

100.00

RGD Ferrara 2013 S.r.L.

Italy

disposed of

-

50.00

The registered office of the companies in the Italy Offices segment is located at 10 Carlo Ottavio Cornaggia, 20123 Milan.

Financial Report at 31 December 2019

23

COVIVIO

162 companies Hotels in Europe segment

Country

Consolidation

Percentage

Percentage

method in 2019

held in 2019

held in 2018

SCA Covivio Hotels (Parent company) 100% controlled

France

FC

43.22

42.30

Oxford Spires Ltd (Propco)

UK

FC

43.22

Oxford Thames Hotel Ltd (Propco)

UK

FC

43.22

Dresden Dev

Luxembourg

FC

41.01

Delta Hotel Amersfoort

Netherlands

FC

43.22

Opci Oteli

France

EM/EA

13.46

Orient SAS financial lease

France

EM/EA

13.46

Express SAS financial lease

France

EM/EA

13.46

Kombon

France

EM/EA

14.41

Jouron

Belgium

EM/EA

14.41

Foncière Gand Cathédrale

Belgium

EM/EA

14.41

Brussels Sainte Catherine REITs

Belgium

EM/EA

14.41

Foncière IGK

Belgium

EM/EA

14.41

Forsmint Investments

Poland

FC

43.22

Cerstook Investments

Poland

FC

43.22

Noxw ood lnvestments

Poland

FC

43.22

Redw en lnvestments

Poland

FC

43.22

Sardobal lnvestments

Poland

FC

43.22

Kilmainham Property Holding

Ireland

FC

43.22

Thommont Ltd

Ireland

FC

43.22

Honeypool

Ireland

FC

43.22

Ruhl Côte d'Azur

France

FC

43.22

100.00

SARL Loire

France

FC

43.22

42.30

Foncière Otello

France

FC

43.22

42.30

Hôtel René Clair

France

FC

43.22

42.30

Foncière Ulysse

France

FC

43.22

42.30

Ulysse Belgique

Belgium

FC

43.22

42.30

Ulysse Trefonds

Belgium

FC

43.22

42.30

Foncière No Bruxelles Grand Place

Belgium

FC

43.22

42.30

No Brussels Airport REITs

Belgium

FC

43.22

42.30

Foncière No Bruges Centre

Belgium

FC

43.22

42.30

Foncière Gand Centre

Belgium

FC

43.22

42.30

Foncière Gand Opéra

Belgium

FC

43.22

42.30

Foncière IB Bruxelles Grand-Place

Belgium

FC

43.22

42.30

Foncière IB Bruxelles Aéroport

Belgium

FC

43.22

42.30

Foncière IB Bruges Centre

Belgium

FC

43.22

42.30

Foncière Antw erp Centre

Belgium

FC

43.22

42.30

Foncière Bruxelles Expo Atomium

Belgium

FC

43.22

42.30

Foncière Manon

France

FC

43.22

42.30

Murdelux

Luxembourg

FC

43.22

42.30

Portmurs

Portugal

FC

43.22

42.30

Sunparks Oostduinkerke

Belgium

FC

43.22

42.30

Foncière Vielsam

Belgium

FC

43.22

42.30

Sunparks Trefonds

Belgium

FC

43.22

42.30

Foncière Kempense Meren

Belgium

FC

43.22

42.30

Iris Holding France

France

EM/EA

8.60

8.42

Foncière Iris SAS

France

EM/EA

8.60

8.42

Sables d'Olonne SAS

France

EM/EA

8.60

8.42

OPCI Iris Invest 2010

France

EM/EA

8.60

8.42

Covivio Hotels Gestion Immobilière

France

FC

43.22

42.30

Tulipe Holding Belgique

Belgium

EM/EA

8.60

8.42

Iris Tréfonds

Belgium

EM/EA

8.60

8.42

Foncière Louvain Centre

Belgium

EM/EA

8.60

8.42

Foncière Liège

Belgium

EM/EA

8.60

8.42

Foncière Bruxelles Aéroport

Belgium

EM/EA

8.60

8.42

Foncière Bruxelles Sud

Belgium

EM/EA

8.60

8.42

Foncière Bruge Station

Belgium

EM/EA

8.60

8.42

Narcisse Holding Belgique

Belgium

EM/EA

8.60

8.42

Foncière Bruxelles Tour Noire

Belgium

EM/EA

8.60

8.42

Foncière Louvain

Belgium

EM/EA

8.60

8.42

Foncière Malines

Belgium

EM/EA

8.60

8.42

Foncière Bruxelles Centre Gare

Belgium

EM/EA

8.60

8.42

Foncière Namur

Belgium

EM/EA

8.60

8.42

Iris investor Holding GmbH

Germany

EM/EA

8.60

8.42

Iris General Partner GmbH

Germany

EM/EA

4.32

4.23

Iris Berlin GmbH

Germany

EM/EA

8.60

8.42

Iris Bochum & Essen

Germany

EM/EA

8.60

8.42

Iris Frankfurt GmbH

Germany

EM/EA

8.60

8.42

Iris Verw altungs GmbH & co KG

Germany

EM/EA

8.60

8.42

Iris Nurnberg GmbH

Germany

EM/EA

8.60

8.42

Iris Stuttgart GmbH

Germany

EM/EA

8.60

8.42

B&B Invest Lux 1

Germany

FC

43.22

42.30

B&B Invest Lux 2

Germany

FC

43.22

42.30

B&B Invest Lux 3

Germany

FC

43.22

42.30

Campeli

France

EM/EA

8.60

8.42

OPCI Camp Invest

France

EM/EA

8.60

8.42

Dahlia

France

EM/EA

8.64

8.46

Foncière B2 Hôtel Invest

France

FC

21.70

21.24

OPCI B2 Hôtel Invest

France

FC

21.70

21.24

Foncière B3 Hôtel Invest

France

FC

21.70

21.24

B&B Invest Lux 4

Germany

FC

43.22

42.30

NH Amsterdam Center Hotel HLD

Netherlands

FC

43.22

42.30

Hotel Amsterdam Centre Propco

Netherlands

FC

43.22

42.30

Mo Lux 1

Luxembourg

FC

43.22

42.30

LHM Holding Lux SARL

Luxembourg

FC

43.22

42.30

LHM ProCo Lux SARL

Germany

FC

45.07

44.24

SCI Rosace

France

FC

43.22

42.30

Mo Drelinden, Niederrad, Düsseldorf

Germany

FC

40.62

39.77

Mo Berlin

Germany

FC

40.62

39.77

Mo First Five

Germany

FC

42.36

41.59

Ringer

Germany

FC

43.22

42.30

B&B Invest Lux 5

Germany

FC

40.19

39.34

Financial Report at 31 December 2019

24

COVIVIO

Companies Hotels in Europe segment

Country

Consolidation

Percentage

Percentage

method in 2019

held in 2019

held in 2018

B&B Invest Lux 6

Germany

FC

40.19

39.34

SCI Hôtel Porte Dorée

France

FC

43.22

42.30

FDM M Lux

Luxembourg

FC

43.22

42.30

OPCO Rosace

France

FC

43.22

42.30

Exco Hôtel

Belgium

FC

43.22

42.30

Invest Hôtel

Belgium

FC

43.22

42.30

H Invest Lux

Luxembourg

FC

43.22

42.30

Hermitage Holdco

France

FC

43.22

42.30

Samoens SAS

France

FC

21.65

10.62

Foncière B4 Hôtel Invest

France

FC

21.70

21.24

B&B Invest Espagne SLU

Spain

FC

43.22

42.30

Rock-Lux

Luxembourg

FC

43.22

42.30

Société Liloise Investissement Immobilier Hôtelier SA

France

FC

43.22

42.30

Alliance et Compagnie SAS

France

FC

43.22

42.30

Berlin I (Propco Westin Grand Berlin)

Germany

FC

41.01

40.15

Opco Grand Hôtel Berlin Betriebs (Westin berlin)

Germany

FC

41.01

40.15

Berlin II (Propco Park Inn Alexanderplatz)

Germany

FC

41.01

40.15

Opco Hôtel Stadt Berlin Betriebs (Park-Inn)

Germany

FC

41.01

40.15

Berlin III (Propco Mercure Potsdam)

Germany

FC

41.01

40.15

Opco Hôtel Potsdam Betriebs (Mercure Potsdam)

Germany

FC

41.01

40.15

Dresden II (Propco Ibis Hôtel Dresden)

Germany

FC

41.01

40.15

Dresden III (Propco Ibis Hôtel Dresden)

Germany

FC

41.01

40.15

Dresden IV (Propco Ibis Hôtel Dresden)

Germany

FC

41.01

40.15

Opco BKL Hotelbetriebsgesellschaft (Dresden II to IV)

Germany

FC

41.01

40.15

Dresden V (Propco Pullman New a Dresden)

Germany

FC

41.01

40.15

Opco Hôtel New a Dresden Betriebs (Pullman)

Germany

FC

41.01

40.15

Leipzig I (Propco Westin Leipzig)

Germany

FC

41.01

40.15

Opco HotelgesellschaftGeberst, Betriebs (Westin Leipzig)

Germany

FC

41.01

40.15

Leipzig II (Propco Radisson Blu Leipzig)

Germany

FC

41.01

40.15

Opco Hôtel Deutschland Leipzig Betriebs (Radisson Blu)

Germany

FC

41.01

40.15

Erfurt I (Propco Radisson Blu Erfurt)

Germany

FC

41.01

40.15

Opco Hôtel Kosmos Erfurt (Radisson Blu)

Germany

FC

41.01

40.15

Airport Garden Hotel NV

Belgium

FC

43.22

42.30

H Invest Lux 2

Luxembourg

FC

43.22

42.30

Constance

France

FC

43.22

42.30

Hotel Amsterdam Noord FDM

Netherlands

FC

43.22

42.30

Hotel Amersfoort FDM

Netherlands

FC

43.22

42.30

Constance Lux 1

Luxembourg

FC

43.22

42.30

Constance Lux 2

Luxembourg

FC

43.22

42.30

So Hospitality

France

FC

43.22

42.30

Nice-M

France

FC

43.22

42.30

Investment FDM Rocatiera

Spain

FC

43.22

42.30

Bardiomar

Spain

FC

43.22

42.30

Trade Center Hotel

Spain

FC

43.22

42.30

Rock-Lux OPCO

Luxembourg

FC

43.22

42.30

Blythsw ood Square Hotel Holdco

UK

FC

43.22

42.30

George Hotel Investments Holdco

UK

FC

43.22

42.30

Grand Central Hotel Company Holdco

UK

FC

43.22

42.30

Grand Principal Birmingham Holdco

UK

FC

43.22

42.30

Lagonda Leeds Holdco

UK

FC

43.22

42.30

Lagonda Palace Holdco

UK

FC

43.22

42.30

Lagonda Russell Holdco

UK

FC

43.22

42.30

Lagonda York Holdco

UK

FC

43.22

42.30

Oxford Spires Hotel Holdco

UK

FC

43.22

42.30

Oxford Thames Holdco

UK

FC

43.22

42.30

Roxburghe Investments Holdco

UK

FC

43.22

42.30

The St David's Hotel Cardiff Holdco

UK

FC

43.22

42.30

Wotton House Properties Holdco

UK

FC

43.22

42.30

Blythsw ood Square Hotel Glasgow

UK

FC

43.22

42.30

George Hotel Investments

UK

FC

43.22

42.30

Grand Central Hotel Company

UK

FC

43.22

42.30

Lagonda Leeds PropCo

UK

FC

43.22

42.30

Lagonda Palace PropCo

UK

FC

43.22

42.30

Lagonda Russell PropCo

UK

FC

43.22

42.30

Lagonda York PropCo

UK

FC

43.22

42.30

Roxburghe Investments PropCo

UK

FC

43.22

42.30

The St David's Hotel Cardiff

UK

FC

43.22

42.30

Wotton House Properties

UK

FC

43.22

42.30

Roxburghe Investments Lux

Luxembourg

FC

43.22

42.30

HEM Diesterlkade Amsterdam BV

Netherlands

FC

43.22

42.30

Lambda Amsterdam BV

Netherlands

merged

-

42.30

Spiegelrei HLD SA

Belgium

Liquidated

-

42.30

Dresden I (Propco Westin Bellevue)

Germany

disposed of

-

40.15

Opco Hôtel Bellevue Dresden Betriebs (Westein Bellevue)

Germany

disposed of

-

40.15

Foncière Développement Tourisme

France

Merger

-

21.19

The registered office of the parent company Covivio Hotels and its main fully consolidated French subsidiaries is located at 30 Avenue Kléber, 75116 Paris.

Financial Report at 31 December 2019

25

COVIVIO

121 companies in the German Residential segment

Country

Consolidation

Percentage

Percentage

method in 2019

held in 2019

held in 2018

Covivio Immobilien SE (Parent company) 99.74% controlled

Germany

FC

61.70

61.70

Covivio Alexanderplatz

Luxembourg

FC

100.00

Covivio Rhenania 1

Germany

FC

65.57

Covivio Rhenania 2

Germany

FC

65.57

Covivio Prime Financing

Germany

FC

61.70

Küchenw elt Berlin GmbH

Germany

FC

61.70

Covivio Office Holding GmbH

Germany

FC

100.00

Covivio Office Berlin GmbH

Germany

FC

100.00

Rev Tino Schw ierzina Strasse 32 Gundbezitz

Germany

FC

94.22

Covivio Flohrstrasse 21

Germany

FC

100.00

Realius Grundbesitz NRW

Germany

FC

67.49

Eiger Propco SPV

Germany

FC

67.49

Eiger II Propco

Germany

FC

67.49

Covivio Immobilien

Germany

FC

61.70

61.70

Covivio Lux Residential

Germany

FC

63.66

63.66

Covivio Valore 4

Germany

FC

63.74

63.74

Covivio Wohnen Verw altungs

Germany

FC

61.70

61.70

Covivio Grundstücks

Germany

FC

61.70

61.70

Covivio Grundvermögen

Germany

FC

61.70

61.70

Covivio Wohnen Service

Germany

FC

61.70

61.70

Covivio SE & CO KG 1

Germany

FC

61.70

61.70

Covivio SE & CO KG 2

Germany

FC

61.70

61.70

Covivio SE & CO KG 3

Germany

FC

61.70

61.70

Covivio SE & CO KG 4

Germany

FC

61.70

61.70

Covivio Zehnte GMBH

Germany

FC

100.00

100.00

IW-FDL Beteiligungs GmbH & Co KG

Germany

FC

100.00

100.00

Covivio Wohnen

Germany

FC

61.70

61.70

Covivio Gesellschaft für Wohnen Datteln

Germany

FC

64.00

64.00

Covivio Stadthaus

Germany

FC

64.00

64.00

Covivio Wohnbau

Germany

FC

67.83

67.83

Covivio Wohnungsgesellechaft GMBH Dümpten

Germany

FC

67.83

67.83

Covivio Berolinum 2

Germany

FC

63.66

63.66

Covivio Berolinum 3

Germany

FC

63.66

63.65

Covivio Berolinum 1

Germany

FC

63.66

63.66

Covivio Remscheid

Germany

FC

63.66

63.66

Covivio Valore 6

Germany

FC

63.74

63.74

Covivio Holding

Germany

FC

100.00

100.00

Covivio Immobilien Se & Co KG Residential

Germany

FC

61.70

61.70

Covivio Berlin 67 GmbH

Germany

FC

64.00

64.00

Covivio Berlin 78 GmbH

Germany

FC

64.00

64.00

Covivio Berlin 79 GmbH

Germany

FC

64.00

64.00

Covivio Dresden GmbH

Germany

FC

63.66

63.66

Covivio Berlin I SARL

Germany

FC

63.66

63.66

Covivio Berlin V SARL

Germany

FC

63.85

63.85

Covivio Berlin C GMBH

Germany

FC

63.66

63.66

Covivio Dansk Holding Aps

Denmark

FC

61.70

61.70

Covivio Dasnk L Aps

Germany

FC

63.66

63.66

Covivio Berlin Prime

Germany

FC

65.53

65.53

Berlin Prime Commercial

Germany

FC

63.66

63.66

Acopio

Germany

FC

100.00

100.00

Covivio Hamburg Holding ApS

Denmark

FC

65.57

65.57

Covivio Hamburg 1 ApS

Germany

FC

65.57

65.57

Covivio Hamburg 2 ApS

Germany

FC

65.57

65.57

Covivio Hamburg 3 ApS

Germany

FC

65.57

65.57

Covivio Hamburg 4 ApS

Germany

FC

65.57

65.57

Covivio North ApS

Germany

FC

65.57

65.57

Covivio Arian

Germany

FC

65.53

65.53

Covivio Bennet

Germany

FC

65.53

65.53

Covivio Marien-Carré

Germany

FC

65.57

65.57

Covivio Berlin IV ApS

Denmark

FC

61.70

61.70

Covivio Lux

Luxembourg

FC

100.00

100.00

Covivio Berolina Verw altungs GmbH

Germany

FC

63.66

63.66

Residenz Berolina GmbH & Co KG

Germany

FC

65.51

65.51

Covivio Quadrigua IV GmbH

Germany

FC

63.66

63.66

Real Property Versicherungsmakler

Germany

FC

61.70

61.70

Covivio Quadrigua 15

Germany

FC

65.51

65.51

Covivio Quadrigua 45

Germany

FC

65.51

65.51

Covivio Quadrigua 36

Germany

FC

65.51

65.51

Covivio Quadrigua 46

Germany

FC

65.51

65.51

Covivio Quadrigua 40

Germany

FC

65.51

65.51

Covivio Quadrigua 47

Germany

FC

65.51

65.51

Covivio Quadrigua 48

Germany

FC

65.51

65.51

Covivio Fischerinsel

Germany

FC

65.57

65.57

Covivio Berolina Fischenrinsel

Germany

FC

65.57

65.57

Covivio Berlin Home

Germany

FC

65.57

65.57

Amber Properties Sarl

Germany

FC

65.53

65.53

Covivio Gettmore

Germany

FC

65.53

65.53

Saturn Properties Sarl

Germany

FC

65.53

65.53

Venus Properties Sarl

Germany

FC

65.53

65.53

Covivio Vinetree

Germany

FC

65.53

65.53

Acopio Facility

Germany

FC

65.53

65.53

Covivio Development

Germany

FC

61.70

61.70

Covivio Rehbergen

Germany

FC

65.57

65.57

Covivio Handlesliegenschaften

Germany

FC

65.57

65.57

Covivio Alexandrinenstrasse

Germany

FC

65.57

65.57

Covivio Spree Wohnen 1

Germany

FC

65.53

65.53

Covivio Spree Wohnen 2

Germany

FC

65.53

65.53

Financial Report at 31 December 2019

26

COVIVIO

Companies in the German Residential segment

Country

Consolidation

Percentage

Percentage

method in 2019

held in 2019

held in 2018

Covivio Spree Wohnen 6

Germany

FC

65.53

65.53

Covivio Spree Wohnen 7

Germany

FC

65.53

65.53

Covivio Spree Wohnen 8

Germany

FC

65.53

65.53

Nordens Immobilien III

Germany

FC

65.53

65.53

Montana-Portfolio

Germany

FC

65.53

65.53

Covivio Cantianstrasse 18 Grundbesitz

Germany

FC

65.53

65.53

Covivio Konstanzer Str.54/Zahringerstr.28, 28a Grundbesitz

Germany

FC

65.53

65.53

Covivio Mariend.Damm28/Markgrafenstr.17 Grundbesitz

Germany

FC

65.53

65.53

Covivio Markstrasse 3 Grundbesitz

Germany

FC

65.53

65.53

Covivio Schnellerstrasse 44 Grundbesitz

Germany

FC

65.53

65.53

Covivio Schnönw alder Str.69 Grundbesitz

Germany

FC

65.53

65.53

Covivio Schulstrasse 16/17.Grundbesitz

Germany

FC

65.53

65.53

Covivio Sophie-Charlotten Strasse 31, 32 Grundbesitz

Germany

FC

65.53

65.53

Covivio Yorckstrasse 60 Grundbesitz

Germany

FC

65.53

65.53

Covivio Zelterstrasse 3 Grundbesitz

Germany

FC

65.53

65.53

Covivio Zinshäuser Alpha

Germany

FC

65.53

65.53

Covivio Zinshäuser Gamma

Germany

FC

65.53

65.53

Second Ragland

Germany

FC

65.53

65.53

Seed Portfollio 2

Germany

FC

65.53

65.53

Erz 1

Germany

FC

65.53

65.53

Covivio Berlin 9

Germany

FC

65.53

65.53

Erz 2

Germany

FC

65.53

65.53

Best Place Bestand

Germany

FC

31.47

31.47

Covivio Berlin 8

Germany

FC

65.53

65.53

Covivio Selectimmo.de

Germany

FC

65.57

65.57

Covivio Prenzlauer Promenade 49 Besitzgesellschaft

Germany

FC

65.53

65.53

Mecau Bau

Germany

FC

52.45

61.70

Covivio Blankenburger Str.

Germany

FC

65.57

65.57

Covivio Immobilien Financing

Germany

FC

65.53

65.53

Covivio Treskow allee 202 Entw icklungsgesellschaft

Germany

FC

65.57

65.57

Covivio Alexanderplatz

Germany

FC

100.00

100.00

Covivio Hathor Berlin

Germany

FC

65.57

65.57

Covivio Hathor Deutschland

Germany

FC

65.57

65.57

Covivio Hansastraße 253

Germany

FC

65.57

65.57

Sew oge Service- Und Wohnungsunternehmen

Germany

disposed of

-

65.53

Seed Portfolio

Germany

merged

-

60.43

The registered office of the parent company Covivio Immobilien SE is at Kleplerstrasse 110-112 - 45147 Essen.

16 companies in Other segment (France Residential, Car parks,

Consolidatio

Percentag

Percentag

Country

n method in

e held in

e held in

Services)

2019

2019

2018

4 companies in France Residential:

Foncière Développement Logements (Parent company) 100 % controlled

France

FC

100,00

100,00

Batisica

Luxembourg

FC

100,00

100,00

Dulud

France

FC

100,00

100,00

Iméfa 95

France

FC

100,00

100,00

Iméfa 71

France

Merger

-

100,00

24-26 rue Duranton

France

Merger

-

100,00

Le Chesnay 1

France

Merger

-

100,00

Rueil 1

France

Merger

-

100,00

Saint Maurice 2

France

Merger

-

100,00

Suresnes 2

France

Merger

-

100,00

25 rue Gutenberg

France

Merger

-

100,00

Iméfa 46

France

Merger

-

100,00

6 Car Park companies:

Republique (Parent company) 100% controlled

France

FC

100,00

100,00

Esplanade Belvédère II

France

FC

100,00

100,00

Comédie

France

FC

100,00

100,00

Gare

France

FC

50,80

50,80

Gespar

France

FC

50,00

50,00

Trinité

France

FC

100,00

100,00

6 Services companies:

Covivio Hotels Management

France

FC

100,00

100,00

Covivio Property SNC

France

FC

100,00

100,00

Covivio Développement

France

FC

100,00

100,00

Covivio SGP

France

FC

100,00

100,00

Covivio Proptech

France

FC

100,00

100,00

Covivio Proptech Germany

Germany

FC

100,00

100,00

FC: Full consolidation

EM/EA: Equity Method - Affiliates

EM/JV: Equity Method - Joint Ventures

NC: Not Consolidated

PC: Proportionate Consolidation

Financial Report at 31 December 2019

27

COVIVIO

The registered office of the parent company Foncière Développement Logements and of all its fully consolidated French subsidiaries is located at 30 avenue Kléber - 75116 Paris.

There are 416 companies in the Group, including 366 fully consolidated companies and 50 equity affiliates.

3.2.3.6 Evaluation of control

Considering the rules of governance that grant Covivio powers giving it the ability to affect asset yields, the following companies are fully consolidated.

  • SCI 11 place de l'Europe (consolidated structured entity)

As at 31 December 2019, SCI 11 place de l'Europe was 50.1% held by Covivio and fully consolidated. The partnership with the Crédit Agricole Assurances Group (49.9%) was established as of 2013 as part of the Campus Eiffage project in Vélizy.

  • SNC Latécoère and Latécoère 2 (consolidated structured entities)

SCI Latécoère and Latécoère 2 are 50.1% held by Covivio at 31 December 2019 and fully consolidated. The partnership with the Crédit Agricole Assurances Group (49.9%) was established in 2012 and 2015 as part of the Dassault Systèmes Campus and Dassault Extension projects in Vélizy.

  • SCIs of 9 and 15 rue des Cuirassiers (consolidated structured entities)

As at 31 December 2019, the SCIs of 9 and 15 rue des Cuirassiers were 50.1% held by Covivio and fully consolidated. The partnership with Assurances du Crédit Mutuel (49.9%) was created in early December 2017 as part of the Silex 1 and Silex 2 office projects in Lyon, Part-Dieu.

  • SAS 6 rue Fructidor (consolidated structured entities)

On 29 October 2019 a partnership was signed by Covivio and Crédit Agricole Assurances with a view to sharing the Saint Ouen SO POP development project, held by the company 6 rue Fructidor. This company, the owner of a plot in St Ouen for the construction of a new office building (31,600m² in floor space for offices and services, 7 storeys, 249 parking spaces). The building permit was obtained on 20 May 2019 and construction is due to be finalised in the third quarter of 2021.

Construction work was completed on a building as part of a CPI signed on 29 October 2019 by Fructidor and Fructipromo.

As at 31 December 2019, the company 6 rue Fructidor was 50.1% held by Covivio and fully consolidated.

  • SCI N2 Batignolles and SNC Batignolles Promo (consolidated structured entities)

SCI N2 Batignolles and SNC Batignolles Promo are 50% held by Covivio at 31 December 2019 and fully consolidated. The partnership with Assurances du Crédit Mutuel (50%) was established in 2018 as part of the N2 Batignolles development project.

  • SAS Samoëns (consolidated structured entity)

As at 31 December 2019, SAS Samoëns was 50.10% held by Covivio Hotels and fully consolidated. The partnership with Assurances du Crédit Mutuel (49.9%) was established as of October 2016 as part of the project to develop a Club Med holiday village in Samoëns.

As manager of Samoëns, Covivio Hotels has the widest powers to act in the name and on behalf of the company in all circumstances, in keeping with its corporate purpose.

The partnership meets the criteria of a joint venture when the parties exercising joint control have rights to net assets of the partnership arrangement. The following companies are consolidated by the equity method.

Financial Report at 31 December 2019

28

COVIVIO

  • SCI Lenovilla (joint venture)

As at 31 December 2019, Lenovilla was 50.09% held by Covivio and is consolidated according to the equity method. The partnership with the Crédit Agricole Assurances Group (49.91%) was established in January 2013 as part of the New Vélizy (Campus Thales) project. The shareholder agreement stipulates that decisions be made unanimously.

  • SCI Cœur d'Orly Bureaux (joint venture)

SCI Cœur d'Orly Bureaux is 50% held by Covivio and 50% by Aéroports de Paris at 31 December 2019 and consolidated by the equity method. On 10 March 2008, the shareholders signed a memorandum of understanding, subsequently amended by a succession of deeds and by partnership agreements which set out the partners' rights and obligations with respect to SCI Cœur d'Orly Bureaux.

The ADP Group (as land developer and joint investor) and Covivio (as property developer and joint investor) signed the required deeds for the construction of the Belaïa office building at Cœur d'Orly, the business district of the Paris-Orly airport. The completion of this building is scheduled for the second half of 2020.

3.2.4 SIGNIFICANT EVENTS DURING THE PERIOD

Significant events during the period were as follows:

3.2.4.1 France Offices

  • Disposals (€286 million - profit or loss on disposals net of fees: +€3 million) and assets under preliminary sale agreements (€55 million)

In 2019, Covivio sold assets for a sale price of €286 million, including the assets Charenton Coupole Nord and Sud (€54 million), Talence Libération (€7 million), Green Corner (€167 million), Roubaix Quatuor (€21 million) and Reims New Saint Charles (€21 million). These disposals resulted in net income of €3.3 million.

At 31 December 2019, the amount of assets under agreement totalled €55 million.

  • Acquisitions (€79 million)

In 2019, Covivio acquired land in Velizy-Villacoublay for €13.1 million, for an extension to the Dassault Systèmes Campus through the construction of a new 27,600 m² building.

In June 2019, SCI Terres Neuves, a subsidiary of Covivio, acquired land in Bègles for €2.4 million for the extension to the Bordeaux Cité Numérique project.

In December 2019, SCI N2 Batignolles, a Covivio subsidiary, acquired lot N2 of the ZAC Clichy Batignolles for €64.2 million with a view to building a 15,900 m² property in partnership with Assurances du Crédit Mutuel.

  • Development portfolio

The asset development programme is presented in note 3.2.5.1.5.

2019 was marked by the delivery of two development projects.

The 9,000 m² Hélios project in Villeneuve- d'Ascq was delivered in March 2019.

Certified HQE Excellent and compliant with RT 2012, this project comprises two buildings linked by a central hall that opens at one corner onto green space and a two-storey car park. It is let in full under a nine-year firm lease to IT-CE, an IT subsidiary of the Caisse d'Épargne Group.

Financial Report at 31 December 2019

29

COVIVIO

In May 2019, the remaining 19,223 m² of the Bordeaux Cité Numérique project was delivered. The first 4000 m² of this project was delivered in July 2018.

This symbol of the "French Tech Bordeaux Métropole" label occupies the former postal sorting office in Bègles.

  • Refinancing and redemption

On 27 May 2019, the bond maturing in 2021 was redeemed early (-€226.9 million).

In February, March and April 2019, Covivio converted 1,670,419 ORNANE-type bonds and redeemed 67,442 bonds on maturity, i.e. a €147.3 million reduction in the bond (par value of €84.73 per bond). The conversion of the bonds gave rise to the creation of 298,053 new Covivio shares, representing a capital increase of €27.2 million.

In September, Covivio issued its second Green Bond of €500 million, maturing in 2031 and offering a 1.125% coupon.

3.2.4.2 Italy Offices

  • Disposals (€344 million - profit or loss on disposals net of fees: -€24 million) and assets under preliminary agreement (€100 million)

In 2019, non-strategic assets were sold for a total sale price of €343.9 million, including the Via Montebello property in Milan.

As at 31 December 2019, assets under preliminary agreement amounted to €100,2 million.

  • Acquisitions (€39 million)

In January 2019, a plot of land was acquired in Milan for €14.7 million, a key part of the development project via Schievano/via Santander (The Sign D) in Milan.

In April 2019, a 75%-owned Italian subsidiary acquired a portfolio of real estate assets for €11.6 million.

In September 2019, an investment property was acquired in Livourne for €12.8 million.

  • Renegotiation and repayment of debts

In May 2019, Covivio (formerly Beni Stabili) prepaid a loan with a nominal value of €195 million and a rate of 1.2%.

In the third quarter of 2019, a loan with a nominal value of €97 million and a rate of 1.2% was prepaid.

These two loans were renegotiated in the first quarter of 2019, resulting in a reduction in rate from 1.4% to 1.2%.

In September 2019, Covivio (formerly Beni Stabili) repaid early a loan with a nominal value of €86.

3.2.4.3 Hotels in Europe

  • Disposals of assets (€396 million - profit or loss on disposals net of fees: +€13 million) and assets under preliminary agreement (€133 million)

Financial Report at 31 December 2019

30

COVIVIO

In 2019, Covivio Hotels sold two portfolios of B&B assets it held in partnership in France, one of 58 hotels, for €265 million in June, and the other 30 hotels for €113 million in December as well as Novotel Lyon Part Dieu for €18 million.

At 31 December 2019, preliminary sale agreements totalled to €132.6 million, including 11 B&B assets in Germany for €114 million and four B&B assets in France for €5 million as well as an Accor asset for €12.6 million and a non-strategic asset for €1 million.

In 2019, Covivio Hotels also sold two companies that held and operated a hotel real estate (Westin Dresden) in Germany via a management contract with Westin, for net proceeds on disposal of €4.1 million.

  • Acquisitions (securities: €322 million / assets: €24 million)

In February 2019, the last two hotels in the portfolio located in the United Kingdom were acquired for €84 million (Oxford Spires and Oxford Thames). These hotels were constructed on land leased for a firm residual term of 78 years, leading to the recognition of €15.7 million in rights-of-use under long-term leases conferring ad rem rights, in accordance with IFRS 16.

In March 2019, Covivio Hotels acquired the securities of a company holding an NH hotel in Amersfoort for €12.5 million.

On 1 July 2019, Covivio Hotels acquired Axa France's 32% share in a portfolio of hotel real estate for €171 million (including €8 million in deferred tax liabilities). It comprises 32 hotels leased to Accor, located in major French cities, and two hotels in Belgium.

In November 2019, Covivio Hotels acquired shares in companies with a Hilton Hotel in Dublin operated as Operating Properties for €54 million.

In the fourth quarter of 2019, three B&B hotels in Poland were acquired for €24 million.

  • Development portfolio

2019 was marked by the delivery of four development projects: the Meininger Hotel in Munich, the B&B Hotel in Cergy, the Meininger Hotel Porte de Vincennes in Paris and the B&B Hotel Zimmerman in Lyon.

  • Refinancing and redemption

In early 2019, Covivio Hotels repaid its German Operating Properties bank debt of €408 million in full. A new loan of €258 million was taken out for this portfolio in December 2019 to be drawn in early 2020.

In February 2019, Covivio Hotels made an additional drawdown of £31 million (€36 million) on the bank borrowings of £400 million with an 8-year term (£369 million already drawn down in 2018).

In June 2019, Covivio Hotels issued a €70 million loan for two German companies and two Dutch companies, with a term of 10 years.

In 2019, the disposal of B&B assets generated a partial repayment of the debt in the amount of €148 million.

3.2.4.4 Germany Residential

  • Asset disposals (€73 million - income from disposals: +€11 million) and assets under preliminary sale agreements (€11 million)

Disposals worth €73 million were completed in 2019, mainly in Berlin.

Financial Report at 31 December 2019

31

COVIVIO

At 31 December 2019, the amount of assets under agreement totalled €11 million (net of costs).

In the second quarter of 2019, Covivio Immobilien also sold 80% of Sewoge which held and operated a portfolio of assets in Berlin with €3 million in income from disposal.

  • Acquisitions (securities: €145 million / assets: €93 million)

In 2019, Covivio Immobilien acquired holding companies for €145.2 million.

The Group also acquired a portfolio of directly held assets in Berlin for €92,7 million (including €83.5 million in assets for the promotion business). A deposit of €1 million had been paid in 2018.

3.2.4.5 Other (including France Residential)

  • Asset disposals (€178 million net of costs) and assets under sales commitments (€26 million)

In France, Foncière Développement Logements continued its sales plan and completed disposals for a sale price of €178.3 million (net of costs).

At 31 December 2019, the amount of assets under agreement totalled €25.9 million.

3.2.5 NOTES TO THE STATEMENT OF FINANCIAL POSITION

3.2.5.1 Portfolio

3.2.5.1.1. Accounting principles applicable to tangible and intangible fixed assets

  • Intangible assets

Identifiable intangible fixed assets are amortised on a straight-line basis over their expected useful lives. Intangible fixed assets acquired are recorded on the balance sheet at acquisition cost. They primarily include entry fees (and occupancy rights for car parks) and computer software.

Intangible fixed assets are amortised on a straight-line basis, as follows:

  • Software: over a period of 1 to 3 years;
  • Occupancy rights: 30 years.

Fixed assets in the concession segment - Concession activity

The Covivio Group applies IFRIC 12 in the consolidated financial statements for car parks that are the subject of service concession agreements. An analysis of the Group's concession agreements results in classifying agreements as intangible assets as the Group is paid directly by users for all car parks operated without a subsidy from public authorities. These concession assets are assessed at historical cost less accumulated depreciation and any impairment.

The Group no longer has any fully owned car parks and consequently there are no longer any tangible "Car park" assets, other than right-of-use assets related to leases under IFRS 16.

Financial Report at 31 December 2019

32

COVIVIO

  • Business combinations (IFRS 3) and goodwill from acquisitions

An entity must determine whether a transaction or event constitutes a business combination within the meaning of the definition of IFRS 3, which stipulates that a business is an integrated set of activities and assets that is capable of being conducted and managed for the purpose of providing a return directly to investors in the form of dividends, lower costs or other economic advantages.

In this case, the acquisition cost is set at the fair value on the date of the exchange of the assets and liabilities and equity instruments issued for the purpose of acquiring the entity. Goodwill is recognised as an asset for the surplus of the acquisition cost on the portion of the buyer's interest in the fair value of the assets and liabilities acquired, net of any deferred taxes. Negative goodwill is recorded in the income statement.

To determine whether a transaction constitutes a business combination, the Group considers whether an integrated set of businesses is acquired in addition to real estate. The criteria the Group uses may be the number of assets and the existence of a process such as asset management or sales and marketing units.

Related acquisition costs are recognised in expense in accordance with IFRS 3 under "Income from changes in consolidation scope" in the income statement.

The prospective additional costs are appraised at fair value at the acquisition date. They are definitely appraised in the 12 months following the acquisition. The subsequent change of these additional costs is recorded in the income statement.

After its initial recognition, the goodwill is subject to an impairment test at least once a year. The impairment test consists in comparing the net book value of the intangible and tangible fixed assets and goodwill related to the valuation of the hotels as "Operating Properties" made by the real estate appraisers.

If the Group concludes that the transaction is not a business combination, then it recognises the transaction as an acquisition of assets and applies the standards appropriate to acquired assets.

  • Investment properties (IAS 40)

Investment properties are real estate properties held for purposes of leasing within the context of operating leases or long-term capital appreciation (or both).

Investment properties represent the majority of the Group's portfolio. The buildings occupied or operated by the Covivio Group employees -own occupied buildings- are recognised under tangible fixed assets (office properties occupied by employees, spaces used for own Flex Office, hotel real estate managed by the Operating Properties business).

Under the option offered by IAS 40, investment properties are assessed at their fair value. Changes in fair value are recorded in the income statement. Investment property is not amortised.

Valuations are carried out in accordance with the Code of conduct applicable to SIICs, the Charter of property valuation expertise, the recommendations of the COB/CNCC working group chaired by Mr Barthès de Ruyter and the international plan in accordance with the International Valuation Standards Council (IVSC) and those of the Red Book 2014 of the Royal Institution of Chartered Surveyors (RICS).

The real estate portfolio directly held by the Group was appraised in full at 31 December 2019 by independent real estate experts including BNP Real Estate, JLL, CBRE, Cushman, CFE, MKG, VIF, REAG, Christie & CO and HVS.

Assets were estimated at values excluding and/or including duties, and rents at market value. Estimates were made using the comparative method, the rent capitalisation method and the discounted future cash flows method.

Financial Report at 31 December 2019

33

COVIVIO

The assets are recognised at their net market value.

  • For France Offices and Italy Offices, the valuations are primarily performed according to two methods:
  1. The yield (or income capitalisation) method:

This approach consists of capitalising an annual income, which, in general, is rental income from occupied assets, with the possible impact of a reversion potential, and market rent for vacant assets, taking into account the time needed to find new tenants, any renovation work and other costs;

  1. The discounted cash flow (DCF) method:

This method consists of determining the useful value of an asset by discounting the forecast cash flows that it is likely to generate over a given time frame. The discount rate is determined on the basis of the risk-free rate plus a risk premium associated with the asset and defined by comparison with the discount rates applied to cash flows generated by similar assets.

  • For Hotels in Europe, the methodology changes according to the type of assets:
  1. The rent capitalisation method is used for restaurants, garden centres and Club Med holiday villages;
    1. The DCF method is used for hotels (including the revenue forecasts determined by the appraiser) and Sunparks holiday villages.
  • For Germany Residential, the fair value determined corresponds to:
    1. A block value for assets for which no sales strategy has been developed or which have not been marketed;
  1. An occupied retail value for assets on which at least one preliminary sale agreement has been made before the reporting date.

The evaluation method used was the discounted cash flow method.

The resulting values are also compared with the initial yield rate and the monetary values per square metre of comparable transactions and transactions carried out by the Group.

IFRS 13 "Fair Value Measurement" establishes a fair value hierarchy that categorises the inputs used in valuation techniques into three Levels:

  • Level 1: the valuation refers to quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
  • Level 2: the valuation refers to valuation methods using inputs that are observable for the asset or liability, either directly or indirectly, in an active market;
  • Level 3: the valuation refers to valuation methods using inputs that are unobservable in an active market.

The fair value measurement of investment properties requires the use of different valuation methods using unobservable or observable inputs to which some adjustments have been applied. Accordingly, the Group's portfolio is mainly categorised as Level 3 according to the IFRS 13 fair value hierarchy.

  • Assets under development (IAS 40)

Assets under construction are recognised according to the general fair-value principle, except where it is not possible to determine this fair value on a reliable and ongoing basis. In such cases, the asset is carried at cost.

Financial Report at 31 December 2019

34

COVIVIO

As a result, development programmes and extensions or remodelling of existing assets that are not yet commissioned are recognised at their fair value and are treated as investment properties whenever the administrative and technical fair-value reliability criteria - i.e. administrative, technical and commercial criteria - are met.

In accordance with revised IAS 23, the borrowing cost during a period of construction and renovation is included in the cost of the assets. The capitalised amount is determined on the basis of fees paid for specific borrowings and, where applicable, for financing from general borrowings based on the weighted average rate of the particular debt.

  • Right-of-use(IFRS 16)

In application of IFRS 16, when a movable or immovable asset is held under a lease, the lessee is required to recognise a right-of-use asset and a rental liability, at amortised cost.

Right-of-use assets are included in the items under which the corresponding underlying assets are presented, if they belonged thereto, namely the items Operating properties, Other tangible fixed assets and Investment properties.

The lessee depreciates the right-of-use on a straight-line basis over the term of the lease, except for rights relating to investment properties, which are measured at fair value.

  • Tangible fixed assets (IAS 16)

Pursuant to the preferred method proposed by IAS 16, operating buildings (head offices and Flex Office business) and managed hotels under the Operating Properties business line (owner occupied buildings

  • occupied or operated by Group employees) are carried at historical cost less accumulated depreciation and any potential impairment. They are amortised over their expected useful life according to a component-based approach.

The hotels operated as Operating Properties are depreciated according to their period of use:

Buildings

50 to 60 years

General installations and layout of the buildings

10 to 30 years

Equipment and furniture

3 to 20 years

If the appraisal values of the Operating Properties is less than the net book value, impairment is recognised, as a priority on the value of the fund, then on the value of the tangible fixed assets.

  • Non-currentassets held for sale (IFRS 5)

In accordance with IFRS 5, when Covivio decides to dispose of an asset or group of assets, it classifies them as assets held for sale if:

  • the asset or group of assets is available for immediate sale in its current condition, subject only to normal and customary conditions for the sale of such assets;
  • its or their sale is likely within one year and marketing for the property has been initiated.

For the Covivio group, only assets corresponding to the above criteria or for which a sale commitment has been signed are classified as assets held for sale.

If a sale commitment exists on the account closing date, the price of the commitment net of expenses constitutes the fair value of the asset held for sale.

Financial Report at 31 December 2019

35

COVIVIO

3.2.5.1.2. Table of changes in fixed assets

Scope change

Disposal

Change in

& change in

Increase

/Reversals

Change in

€ thousand

31/12/2018

Transfers

exchange

31/12/2019

accounting

/Charges

of

fair value

rate

method

provisions

Goodw ill

113 064

-3 946

-2 195

0

0

36 363

(1)

0

143 286

(2)

Intangible assets

59 138

6

1 385

-695

0

-36 363

0

23 471

Gross amounts

125 599

-145

5 212

-1 674

0

-36 371

(1)

0

92 621

Depreciation

-66 461

151

-3 827

979

0

8

0

-69 150

Tangible fixed assets

1 241 675

94 200

-7 855

-2 544

0

163 966

1

1 489 442

Operating properties

1 181 280

92 122

-37 665

2 200

0

171 770

0

1 409 707

Gross amounts

1 454 651

56 471

13 267

-4 000

0

178 060

(3)

0

1 698 449

Depreciation

-273 371

35 651

-50 932

6 200

0

-6 290

0

-288 742

Other tangible fixed assets

35 443

2 078

4 077

-247

0

504

0

41 855

Gross amounts

167 048

-8 596

14 630

-4 304

0

470

0

169 248

Depreciation

-131 605

10 674

-10 553

4 057

0

34

0

-127 393

Fixed assets in progress

24 952

0

25 733

-4 497

0

-8 308

0

37 880

Gross amounts

24 952

0

25 733

(4)

-4 497

0

-8 308

0

37 880

Depreciation

0

0

0

0

0

0

0

0

Investment properties

20 139 338

239 467

666 355

-362 849

986 116

-885 832

55 286

20 837 882

Operating properties

19 269 751

239 467

262 280

-362 849

726 346

-685 976

55 286

19 504 306

Properties under development

869 587

0

404 075

0

259 770

-199 856

0

1 333 576

Assets held for sale

558 848

0

1 654

-890 201

17 519

636 472

0

324 292

Assets held for sale

558 848

0

1 654

-890 201

17 519

636 472

0

324 292

Total

22 112 063

329 727

659 344

-1 256 289

1 003 635

-85 394

55 286

22 818 374

Changes in the scope of tangible and intangible fixed assets relate mainly to the disposal of the Westin Dresden asset (-€42.8 million), to the acquisition of the Hilton Hotel in Dublin (+€53.8 million) and to the change in the accounting method for the first-time application of IFRS 16 for €77.4 million (see 3.2.1.2).

The total of the transfer column (-€88.7 million) corresponds primarily to assets transferred as real estate development stock.

The hotels portfolio held as Operating Properties totalled €1,049.3 million at 31 December 2019. In accordance with IAS 16, they are recognised in the "Tangible fixed assets" line.

  1. The reclassification of €36.4 million corresponds to the business assets of the Hermitage portfolio, reclassified as goodwill.
  2. The "Intangible fixed assets" line includes in particular the car park concession assets and leases in the amount of €18 million.
  3. Of which transfer to operating properties of the future Covivio headquarters (+€133.9 million), Flex Office assets, Paris Gobelins (+€35.2 million) and Milan, via Dante (+€50.3 million) and transfer to investment properties of the Alexanderplatz plot (-€43.4 million).
  4. Of which work on German Residential assets (€10.9 million), Operating Property assets (€3.1 million) and the future Covivio headquarters (€6.7 million) and Paris Gobelins (€5.4 million).
    Fixed assets in progress also include instalments paid on Office asset acquisitions in Italy (€0.4 million) and on Office asset acquisitions in France (€1 million).

The "Disbursements related to the acquisition of tangible and intangible fixed assets" line on the Statement of Cash Flows (€674.2 million) refers to increases in the table of changes in the portfolio excluding the effect of depreciation (€726.9 million), to increases in inventories of the estate agent and developer (+€8.3 million) adjusted for change in trade payables for fixed assets (-€7 million) and restatements for step rental schemes and rent exemptions (-€52.9 million).

The "Proceeds relating to the disposal of tangible and intangible fixed assets" line in the Statement of Cash Flows (€1,198.6 million) primarily corresponds to income from disposals as presented in section

Financial Report at 31 December 2019

36

COVIVIO

3.2.6.3. Proceeds from the disposal of assets (€1,257.5 million), to the proceeds from the disposal of assets in inventory (€2 million) and restated for the change in receivables on asset disposals (-€60.8 million).

3.2.5.1.3. Investment properties

Scope

change &

Change in

Transfers

Change in

€ thousand

31/12/2018

change in

Increase

Disposal

and

exchange

31/12/2019

fair value

accounting

disposals

rate

method

Investment properties

20,139,338

239,467

666,355

-362,849

986,116

-885,832

55,286

20,837,882

Operating properties

19,269,751

239,467

262,280

-362,849

726,346

-685,976

55,286

19,504,306

France Offices

5,411,745

-11,600

54,560

0

26,241

-496,807

0

4,984,139

Italy Offices

3,602,273

0

39,925

-362,849

-9,854

-89,630

0

3,179,865

Hotels in Europe

4,532,777

139,729

51,664

0

195,964

-53,527

55,286

4,921,894

Germany Residential

5,722,956

111,338

116,131

0

513,995

-46,012

0

6,418,408

Properties under development

869,587

0

404,075

0

259,770

-199,856

0

1,333,576

France Offices

373,752

0

291,049

0

204,849

-1,330

0

868,320

Italy Offices

380,502

0

88,963

0

16,101

-106,297

0

379,269

Hotels in Europe

115,333

0

10,062

0

23,478

-138,943

0

9,930

Germany Residential

0

0

14,001

0

15,342

46,714

0

76,057

Assets held for sale

558,848

0

1,654

-890,201

17,519

636,472

0

324,292

France Offices

35,392

0

-190

-277,253

-50

297,130

0

55,029

Italy Offices

43

0

-3

-43

-15,864

116,072

0

100,205

Hotels in Europe

288,072

0

1,014

-379,793

30,964

192,381

0

132,638

Germany Residential

29,664

0

450

-53,852

3,365

30,889

0

10,516

Other

205,677

0

383

-179,260

-896

0

0

25,904

Total

20,698,186

239,467

(1)

668,009

(1)

-1,253,050

1,003,635

-249,360

55,286

21,162,174

  1. Details of the increases and changes in the scope of the investment properties and assets held for sale are shown in section 3.2.5.1.4.

The amounts in the "disposals" column correspond to the appraisal figures published on 31 December 2018.

Consolidated portfolio of assets at 31 December 2019 (in €M):

21,162

The Group has not identified the best use of an asset as being different from its current use. Consequently, the application of IFRS 13 did not lead to a modification of the assumptions used for the valuation of assets.

In accordance with IFRS 13, the tables below provide details of the ranges of unobservable inputs by business segment (Level 3) used by the real estate appraisers:

Financial Report at 31 December 2019

37

COVIVIO

  • France Offices, Italy Offices and Hotels in Europe:

Yield rate

Yield rate

Discounted

excluding

excluding

Discounted cash

cash flow rate

Portfolio (€M)

duties

duties (min.-

flow rate

(weighted

(weighted

max.)

average)

Grouping of similar assets

Level

average)

Paris Centre West

Level 3

1 089

2.8% - 7.2%

3,2%

3.7%

- 7.0%

5,0%

Paris North East

Level 3

412

3.6% - 4.2%

5,1%

4.0%

- 4.7%

4,3%

Southern Paris

Level 3

713

3.1% - 5.7%

4,7%

3.7%

- 5.7%

4,7%

Western Crescent

Level 3

1 590

3.6% - 7.7%

4,8%

3.7%

- 7.5%

5,3%

Inner rim

Level 3

1 215

3.2% - 6.2%

5,8%

4.0%

- 7.7%

5,7%

Outer rim

Level 3

54

4.6% - 13.1%

9,6%

4.2%

- 9.5%

5,5%

Total Paris Regions

5 073

2.8% - 13.1%

3.7% - 9.5%

Major Regional Cities

Level 3

698

3.9% - 11.7%

6,6%

4.0% - 11.5%

5,5%

Regions

Level 3

137

6.4% - 14.3%

9,4%

4.2% - 12.2%

9,0%

Total Regions

835

3.9% - 14.3%

4.0% - 12.2%

Total France Offices

5 907

2.8% - 14.3%

3.7% - 12.2%

Milan

Level 3

1 887

2.7% - 6.3%

4,6%

4.5% - 6.4%

5,2%

Rome

Level 3

186

3.0% - 6.8%

4,8%

5.2% - 6.8%

6,2%

Other

Level 3

1 208

5.3% - 7.8%

6,6%

5.7% - 6.9%

6,7%

Total in operation

3 280

Development portfolio

Level 3

379

6.3% - 9.0%

Total Italy Offices

3 659

Hotels

Level 3

4 685

3.5% - 6.2%

4,8%

4.2% - 7.8%

5,7%

Retail

Level 3

166

6.4% - 8.0%

7,6%

5.6% - 8.4%

7,3%

Total in operation

4 851

Development portfolio

Level 3

10

5,6%

5,6%

Use rights

Level 3

203

Total Hotels in Europe

5 064

  • German Residential:

Yield rate (*)

Block valued

Discounted cash

Average value

Grouping of similar assets

Level

Portfolio (€M)

Total portfolio

properties

flow rate

(€/m2)

Duisburg

Level 3

267

3.9% - 4.7%

3.0% - 4.7%

4.9% - 5.7%

1,298

Essen

Level 3

600

3.7% - 6.0%

3.7% - 6.0%

5.0% - 7.2%

1,592

Mülheim

Level 3

187

4.0% - 5.1%

4.0% - 5.1%

5.0% - 6.1%

1,431

Oberhausen

Level 3

165

4.3% - 6.2%

4.3% - 6.2%

5.3% - 7.2%

1,130

Datteln

Level 3

123

3.6% - 5.0%

3.6% - 5.0%

4.6% - 6.0%

1,079

Berlin

Level 3

3,707

1.9% - 4.8%

1.9% - 4.8%

3.9% - 6.9%

2,852

Düsseldorf

Level 3

156

2.6% - 3.8%

2.6% - 3.8%

4.1% - 5.3%

2,419

Dresden

Level 3

395

3.0% - 4.5%

3.0% - 4.5%

4.1% - 5.8%

2,045

Leipzig

Level 3

198

3.4% - 4.6%

3.4% - 4.6%

4.9% - 6.1%

1,540

Hamburg

Level 3

454

1.9% - 4.0%

1.9% - 4.0%

3.4% - 5.5%

3,165

Other

Level 3

144

2.6% - 4.8%

2.6% - 4.8%

4.1% - 5.8%

1,741

Total in operation

6,395

Germany Offices

Level 3

110

Total German Residential

6,505

(*) Yields rates:

German Residential: Potential yield rate assumed excluding taxes (actual rents/appraisal values excluding taxes)

Impact of changes in the yield rate on changes in the fair value of real estate assets, by operating segment

Yield**

Yield rate

Yield rate

€ million

-50 bps

+50 bps

France Offices*

5,1%

545,1

-448,1

Italy Offices

5,6%

324,6

-271,0

Hotels in Europe*

5,3%

535,2

-438,2

Germany Residential

4,0%

905,5

-706,5

Total *

4,9%

2 310,4

-1 863,8

  • including assets held by equity affiliates, excl. operating property assets.
  • Yield on operating portfolio - excl. duties
    • If the yield rate excluding taxes drops 50 bps (-0.5 points), the market value excluding taxes of the real estate assets will increase by €2,310 million.
    • If the yield rate excluding taxes increases 50 bps (+0.5 points), the market value excluding taxes of the real estate assets will decrease by €1,863 million.

Financial Report at 31 December 2019

38

COVIVIO

3.2.5.1.4.

Acquisitions and works

Scope

change &

€ thousand

change in

Acquisitions

Works

Total increase

accounting

method

Mercure Nice reclustering

-11.600

France Offices

-11.600

0

54.560

54.560

Asset "Palazzo Orlando"

13.065

Italy Offices

0

13.065

26.860

39.925

Mercure Nice reclustering

11.600

Use rights on leases in the United Kingdom

12.035

571

Use rights for investment properties

15.699

Investments in the United Kingdom (Oxford)

87.874

812

NH Amersfoort Hotel

12.521

Plot in Dresden

4.726

Ibis Annecy plot

1.499

3 assets in Poland (B&B)

23.517

Hotels in Europe

128.129

31.125

20.539

51.664

Investments in Berlin

73.056

Investments in Essen and Dortmund

20.031

Investments in Dresden and Leipzig

52.553

Disposals through equity investments

-33.932

Other

-370

Assets in Berlin

5.853

Germany Residential

111.338

5.853

110.278

116.131

TOTAL Operating properties

227.867

50.043

212.237

262.280

Land for DS Campus extension

13.138

Terres Neuves land

2.372

N2 Batignolles land

64.166

France Offices

0

79.676

211.373

291.049

Plot of land in Milan, via Santander/via Schievano

11.712

Italy Offices

0

11.712

77.251

88.963

Hotels in Europe

0

0

10.062

10.062

Other

5.269

Germany Residential

0

5.269

8.732

14.001

TOTAL Properties under development

0

96.657

307.418

404.075

France Offices

-190

-190

Italy Offices

-3

-3

Hotels in Europe

0

1.014

1.014

Germany Residential

450

450

Other

383

383

Total Assets held for sale

0

0

1.654

1.654

Total

227.867

146.700

521.309

668.009

Almost €900 million in acquisitions and works, of which €404 million for properties under development.

Financial Report at 31 December 2019

39

COVIVIO

3.2.5.1.5. Properties under development

Properties under development relate to building or redevelopment programmes that fall within the application of IAS 40 (revised).

Acquisitions

Capitalised

Change in

Transfers

31/12/2018

and

31/12/2019

and w orks

interest

fair value

€ thousand

disposals

Levallois Alis

0

2 077

2 701

20 022

124 200

149 000

DS Campus extension

0

14 248

4 353

18 601

Terres Neuves

0

2 452

-22

2 430

N2 Batignolles

0

83 086

222

-7 253

76 055

Lyon Silex 2nd tranche

103 200

17 008

2 590

33 350

-14 848

141 300

Lyon Silex 3rd tranche

2 700

45

5 255

8 000

Montrouge Flow

49 700

26 697

1 357

46 746

124 500

Paris So Pop

86 500

17 044

2 323

57 155

-8 922

154 100

Châtillon Iro

35 198

58 111

1 845

25 046

120 200

Meudon Opale

31 644

594

106

32 344

Montpellier Orange

8 600

4 525

121

3 654

16 900

Montpellier Rie

2 300

3 801

79

320

6 500

Montpellier Pompignane

3 750

2 487

-2 487

3 750

Meudon Ducasse

4 000

9 417

216

1 007

14 640

Paris Gobelins

0

942

262

3 896

-5 100

0

Meudon Canopée

20 560

574

0

-1 274

-19 860

0

Cité Numérique

4 600

33 456

139

5 105

-43 300

0

Lezennes - Helios

21 000

2 542

88

6 970

-30 600

0

France Offices

373 752

279 106

11 943

204 849

-1 330

868 320

Milan, via Unione/via Torino

0

41

94

1 765

33 400

35 300

Milan, via Schievano/via Santander

0

11 856

454

-11

3 001

15 300

Milan, piazza Duca d'Aosta

0

2 997

117

4 026

6 930

14 070

Milan, via Dante

43 400

7 086

1 242

-51 728

0

Milan, Symbiosis area

142 700

13 902

5 419

5 579

-32 500

135 100

Turin Corso Ferrucci

86 903

3 914

0

-5 718

85 099

Milan, via Schievano

45 799

36 612

2 022

9 967

94 400

Milan, via Principe Amedeo

61 700

2 587

620

493

-65 400

0

Italy Offices

380 502

78 995

9 968

16 101

-106 297

379 269

Meininger Porte de Vincennes

48 393

1 460

782

11 790

-62 425

0

Meininger Lyon Zimmermann

13 409

3 663

328

3 078

-20 478

0

B&B Cergy

5 260

694

45

1 091

-7 090

0

B&B Bagnolet

6 240

2 282

113

1 295

9 930

Meininger Munich

42 031

550

145

6 224

-48 950

0

Hotels in Europe

115 333

8 649

1 413

23 478

-138 943

9 930

Alexanderplatz

0

12 723

1 278

15 342

46 714

76 057

Germany Residential

0

12 723

1 278

15 342

46 714

76 057

Total

869 587

379 473

24 602

259 770

-199 856

1 333 576

The column "transfers and disposals" includes in particular the transfer of Meudon Canopée to assets held for sale (-€19.9 million), the transfer of "advances and pre-payments" to France Offices (-€31 million) and the transfer of Milan, Symbiosis to "real estate development" (-€32.5 million) and of Milan, via Dante to Flex Office activity under Italy Offices (-€51.7 million).

Financial Report at 31 December 2019

40

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3.2.5.2 Financial assets

3.2.5.2.1. Accounting principles

  • Other financial assets

Other financial assets consist of investment-fund holdings, which cannot be classified as cash or cash equivalents.

These securities are recognised upon acquisition at cost plus transaction costs. They are then recognised at fair value in the income statement on the reporting date. The fair value is arrived at on the basis of recognised valuation techniques (reference to recent transactions, Discounted Cash Flows, etc.). Some securities that cannot be reliably measured at fair value are recognised at acquisition cost.

Securities available for sale of listed and non-consolidated companies are recorded at their stock-market price with an offsetting entry in shareholders' equity in accordance with IFRS 9.

Dividends received are recognised when they have been approved by vote.

  • Loans

At each reporting date, loans are recorded at their amortised cost. Moreover, impairment is recognised and recorded on the income statement when there is an objective indication of impairment as a result of an event occurring after the initial recognition of the asset.

3.2.5.2.2. Table of financial assets

Change in

Scope

Change in

31/12/2018

Increase

Decrease

Transfers

exchange

31/12/2019

fair value

change

€ thousand

rate

Ordinary loans(1)

101,027

55,974

-16,206

0

0

-10,223

0

130,572

Total loans and current accounts

101,027

55,974

-16,206

0

0

-10,223

0

130,572

Advances and pre-payments on acquisition of

shares

7,494

27,000

-7,604

0

0

0

110

27,000

Securities at historic cost

28,288

-1,972

-452

0

3,128

-527

0

28,465

Dividends to be received

0

0

0

0

0

0

0

0

Subscribed capital not paid up

20,040

0

0

0

0

-20,040

0

0

Total other financial assets(2)

55,822

25,028

-8,056

0

3,128

-20,567

110

55,465

Receivables on financial assets

12,808

78,662

-2,609

0

0

751

1

89,613

Total receivables on financial assets

12,808

78,662

-2,609

0

0

751

1

89,613

Total

169,657

159,664

-26,872

0

3,128

-30,039

112

275,651

Amortisations and provisions(3)

-16,810

-168

387

0

0

0

0

-16,591

NET TOTAL

152,847

159,496

-26,485

0

3,128

-30,039

112

259,060

  1. Ordinary loans include receivables from equity investments in equity affiliates. The increase for the period is mainly due to the loan granted to the companies acquired in July 2019 that own
    32 hotels in France and Belgium (+€53.7 million).
  2. Total other financial assets are broken down as follows:
    • Advances and deposits made to acquire securities in companies:

A deposit of €27 million was paid for the acquisition of a portfolio of hotels located in the city centres of major European cities (Rome, Florence, Venice, Budapest, Prague and Nice), see Section 3.2.9 Subsequent events.

  • Securities at historic cost:
    The investments held by Covivio in Italy in real estate funds (€17 million) are valued at their historical cost. Potential impairments are recorded in the income statement.
  • Receivables on financial assets: The increase in receivables on financial assets mainly corresponds to receivables on disposals in Italy Offices (+€78.2 million). Indeed, the disposal of the Galleria Del Corso asset generated a receivable of €30 million maturing in 2021, and the disposal of the Chronos asset generated a receivable of €48.2 million maturing in December 2022.

Financial Report at 31 December 2019

41

COVIVIO

  1. Includes impairment losses on securities at historical cost held by Covivio in Italy (€11.4 million) and impairment losses on receivables for disposals of more than one year (€3.3 million) and for receivables related to financial assets (€1.9 million).

3.2.5.3 Investments in equity affiliates and joint ventures

3.2.5.3.1. Accounting principles

Investments in equity affiliates and joint ventures are recognised by the equity method. According to this method, the Group's investment in the equity affiliate or the joint venture is initially recognised at cost, increased or reduced by the changes, subsequent to the acquisition, in the share of the net assets of the affiliate. The goodwill related to an equity affiliate or joint venture is included in the book value of the investment, if it is not impaired. The share in the earnings for the period is shown in the line item "Share in income of equity affiliates".

The financial statements of associates and joint ventures are prepared for the same accounting period as for the parent company, and adjustments are made, where relevant, to adapt the accounting methods to those of the Covivio group.

3.2.5.3.2. Table of investments in equity affiliates and joint ventures

Of w hich

Of w hich

distribution

€ thousand

% held

Operating segment

Country

31/12/2018

31/12/2019

Change

share of net

and change

income

in scope

SCI Factor E and SCI Orianz

34.69%

France Offices

France

11,002

13,968

2,966

2,966

0

Lenovilla (New Vélizy)

50.10%

France Offices

France

68,557

60,291

-8,266

-3,256

-5,010

Euromarseille (Euromed)

50.00%

France Offices

France

43,008

49,880

6,872

5,871

1,001

Cœur d'Orly (Askia and Belaïa)

50.00%

France Offices(1)

France

26,090

29,765

3,675

5,741

-2,067

Investire Immobiliare and others

Italy Offices

Italy

17,191

13,879

-3,312

-2,380

-932

Iris Holding France

19.90%

Hotels in Europe

Belgium, Germany

15,501

19,256

3,756

4,386

-630

OPCI IRIS Invest 2010

19.90%

Hotels in Europe

France

30,393

32,007

1,614

2,982

-1,368

OPCI Camp Invest

19.90%

Hotels in Europe

France

20,444

21,097

653

1,769

-1,116

Dahlia

20.00%

Hotels in Europe

France

17,559

20,012

2,453

3,177

-725

Phoenix

31.15%

Hotels in Europe

France, Belgium

0

114,159

114,159

8,044

106,115

and 33.33%

Total

249,746

374,316

124,570

29,301

95,269

(1) (including the Belaïa building under development)

The investments in equity affiliates at 31 December 2019 amounted to €374.3 million, compared with €249.7 million as at 31 December 2018, i.e. an increase of €124.6 million.

The change over the period is mainly due to the appropriation of 2018 net income (-€15.1 million), by the acquisition of hotel holding companies in France and Belgium (+€106.1 million), the increase in Euromed's capital (+€5 million) and net income for the period (+€29.3 million).

3.2.5.3.3. Breakdown of shareholdings in the main associates and joint ventures

SCI Factor E /

Ow nership

Cœur

Group

SCI Lenovilla

SCI Orianz

d'Orly

Euromed

(New velizy)

(Bordeaux

Armagnac)

Covivio

50.0%

50.0%

50.09%

34.7%

Non-Group third parties

50.0%

50.0%

49.91%

65.3%

Crédit Agricole Assurances

50.0%

49.91%

Aéroport de Paris

50.0%

ANF Immobilier

65.3%

Total

100%

100%

100%

100%

Financial Report at 31 December 2019

42

COVIVIO

Indirect ownership

Iris Holding

OPCI Iris

OPCI

SCI Dahlia

OPCI Oteli

Kombon

Jouron

France

Invest 2010

Campinvest

(Phoenix)

(Phoenix)

(Phoenix)

Covivio Hotels

19,9%

19,9%

19,9%

20,0%

31,2%

33,3%

33,3%

Non-Group third parties

80,1%

80,1%

80,1%

80,0%

68,9%

66,7%

66,7%

Sogecap

31,2%

33,3%

33,3%

Caisse de dépôt et consignation

37,7%

33,3%

33,3%

Crédit Agricole Assurances

80,1%

80,1%

68,8%

80,0%

Pacifica

11,3%

Total

100%

100%

100%

100%

100%

100%

100%

3.2.5.3.4. Key financial information on equity affiliates and joint ventures

Total non-

Total

current

Total

Total non-

current

liabilities

Financial

Rental

Cost of net

Net income

€ thousand

Asset name

balance

current

Cash

liabilities

excluding

payables

income

financial debt

consolidated

sheet

assets

excluding

financial

financial debt

debt

Cœur d'Orly (Askia and Belaïa)

Lenovilla (New Vélizy)

Euromarseille (Euromed)

SCI Factor E and SCI Orianz

Iris Holding France

OPCI IRIS Invest 2010

OPCI Camp Invest

Dahlia

OPCI Oteli, Jouron, Kombon

Cœur d'Orly

138 084

129 587

3 412

613

5 352

78 828

4 014

-757

10 759

New Velizy and

279 926

274 913

4 849

0

136

159 438

11 890

-2 182

-6 500

extension

Euromed Center

214 810

200 689

7 608

1 234

5 086

108 729

8 443

0

11 743

Bordeaux

146 646

137 158

6 214

485

8 768

97 126

3 710

-1 277

8 551

Armagnac

AccorHotels

231 047

207 509

22 382

21 363

2 427

110 367

13 319

-2 997

22 040

Hotels

AccorHotels

274 991

253 188

21 484

2 648

235

111 269

17 309

-2 059

14 984

Hotels

Campanile Hotels

187 231

170 950

14 086

0

288

80 926

12 150

-1 664

8 890

AccorHotels

178 390

173 083

5 034

0

260

78 072

8 986

-1 704

15 887

Hotels

AccorHotels

572 603

551 363

15 908

23 498

7 134

184 373

30 311

-3 454

90 288

Hotels

3.2.5.4 Deferred tax liabilities on the reporting date

Increases

Decreases

Balance sheet

First time

Net income for

Shareholder's

Other changes

Net income for

Difference in

Change in

Removals from

Balance sheet

as at 31 Dec 18

consolidation

the scope of

as at 31 Dec 19

€ thousand

the period

equity

and transfers

the period

rates

exchange rate

scope

consolidation

DTA

Losses carried forward

53 600

17

8 692

-2 254

-16

60 039

Fair value of properties

6 784

3 908

48 836

-9 082

-102

94

-1 207

49 231

Derivatives

6 838

4 418

-169

11 087

Temporary differences

66 565

-1

1 198

2 211

-48 962

-1 613

-2

22

-2 046

17 372

133 787

137 729

DTA/DTL offset

-65 822

-75 797

TOTAL DTA

67 965

16

18 216

2 211

-126

-13 118

-120

116

-3 253

61 932

Increases

Decreases

Balance sheet

First time

Net income for

Shareholder's

Other changes

Net income for

Difference in

Change in

Removals from

Balance sheet

as at 31 Dec 18

consolidation

the scope of

as at 31 Dec 19

€ thousand

the period

equity

and transfers

the period

rates

exchange rate

scope

consolidation

DTL

Fair value of properties

878 643

26 350

137 885

-150

-23 157

-2 813

2 660

-4 426

1 014 992

Derivatives

1 807

20

-28

1 799

Temporary differences

29 377

4 331

10 596

24

-1 572

-217

33

42 572

909 827

1 059 363

DTA/DTL offset

-65 822

-75 797

TOTAL DTL

844 005

30 681

148 501

0

-126

-24 757

-3 030

2 693

-4 426

983 566

NET TOTAL

-776 040

-30 665

-130 285

2 211

0

11 639

2 910

-2 577

1 173

-921 634

Total impact on the income statement:

-115 736

Negative net bal

ance = liabilities

Of w hich DTA on the corporation tax line

-2 096

At 31 December 2019, the consolidated deferred tax position showed a deferred tax asset of €62 million (versus €68 million as at 31 December 2018) and a deferred tax liability of €983 million (versus €844 million as at 31 December 2018).

Financial Report at 31 December 2019

43

COVIVIO

The primary contributors to the net balance of deferred taxes are:

  • Germany Residential: €644 million
  • Hotels in Europe: €269.9 million.
  • Italy Offices: €7.4 million

The increase in net deferred tax liabilities (+€145.6 million) is mainly due to acquisitions in the fiscal year (+€27 million) in the United Kingdom, in Dublin, in Amsterdam and in Germany, and to the impact of the deferred tax liabilities relating to increases in the appraisal values of on the portfolio (+€120 million).

The impact on income is detailed in paragraph 3.2.6.7.2.

In accordance with IAS 12, deferred tax assets and liabilities are offset for each tax entity when they involve taxes paid to the same tax authority.

The non-recognised tax loss carryforwards, calculated at the standard rate, amounted to €906 million as detailed below:

Non-

Non-recognised

€ thousand

recognised

tax loss

DTA

carryforw ards

France Offices

98 402

285 778

Italy Offices

15 883

79 417

Hotels in Europe

37 025

120 631

Germany Residential

9 687

61 212

Other

116 773

359 099

Total

277 770

906 138

3.2.5.5 Short-term loans

€ thousand

31/12/2018

Changes in

Increase

Decrease

Transfers

31/12/2019

scope

Short-term loans

6,469

0

7,789

-6,420

19,914

27,752

Total

6,469

0

7,789

-6,420

19,914

27,752

Amortisations and provisions

0

0

0

0

0

0

NET TOTAL

6,469

0

7,789

-6,420

19,914

27,752

The change in short-term loans (+€21.2 million) primarily reflects the reclassification as short term of the loan granted to the equity affiliate Lenovilla (+€20 million) and the change in accrued interest not yet due (+€1.4 million).

3.2.5.6 Inventories and work-in-progress

3.2.5.6.1. Accounting principles applicable to inventories

Inventories are intended to be sold during the normal course of business. They are recorded at acquisition price and, as applicable, are depreciated in relation to the sale value (independent appraisal value).

Inventories are composed of two classification types: Property dealers (mainly in Italy, purchase/sale) and real estate development (housing and offices). They are assessed at cost.

Financial Report at 31 December 2019

44

COVIVIO

3.2.5.6.2.

Inventories and work-in-progress

€M - Consolidated data

31 Dec 19

31 Dec 18

Variation

NET

NET

Real estate company trading properties

28 833

79 255

-50 422

France Offices

273

0

273

Hotels in Europe

2 261

2 236

25

Germany Residential

96

48

48

Miscellaneous trading properties (raw materials, g

2 630

2 284

346

Extension property Germany Residential

13 745

0

13 745

France Offices

20 290

13 880

6 410

Italy Offices

34 016

0

34 016

Germany Residential

133 034

392

132 642

Real estate trading properties

201 085

14 272

186 813

Total inventories and w ork-in progress

232 548

95 811

136 737

The balance sheet item "Inventories and work-in-progress" groups together inventories from trading activities in Italy Offices (€26.8 million), and assets dedicated to the real estate development business for €201.1 million.

3.2.5.7 Trade receivables

3.2.5.7.1. Accounting principles applicable to trade receivables and the receivables of hotels under operation

The trade receivables are mainly comprised of receivables from simple lease transactions and receivables of hotels under operation. These items are measured at amortised cost. In the event that the recoverable value is lower than the net book value, the Group may be required to account for an impairment charge through profit or loss.

  • Receivables from operating lease transactions

For operating-lease receivables, a provision for impairment is made at the first non-payment. The impairment rates applied by Covivio group are as follows:

  • No impairment provision is recorded for existing or vacated tenants whose receivables are less than three months overdue,
  • 50% of the total amount of receivables for existing tenants whose receivables are between three and six months overdue,
  • 100% of the total amount of receivables for existing tenants whose receivables are more than six months overdue,
  • 100% of the total amount of receivables for vacated tenants whose receivables are more than three months overdue.

The receivables and theoretical impairments arising from the rules above are reviewed on a case- by-case basis in order to factor in any specific situations.

  • Receivables of hotels under operation

Receivables of hotels under operation are impaired according to payment deadlines.

Financial Report at 31 December 2019

45

COVIVIO

The receivables and theoretical impairments arising from the rules above are reviewed on a case-by- case basis in order to factor in any specific situations.

3.2.5.7.2. Trade receivables

€ thousand

31/12/19

31/12/18

Variation

Expenses to be reinvoiced to tenants

151.537

146.705

4.832

Rent-free periods

44.405

91.743

-47.338

Trade receivables

209.217

102.078

107.139

Total trade receivables

405.159

340.526

64.633

Impairment of receivables

-28.429

-27.314

-1.115

Net total trade receivables

376.730

313.212

63.518

The change in trade receivables (+€107.1 million) is primarily due to the increase in receivables relating to real estate development (of which housing reservations +€35.2 million). There is a similar increase under tax liabilities.

The line "Change in working capital requirements on continuing operations" on the Cash Flow Statement consists of:

€ thousand

31-Dec-19

31-Dec-18

Impact of changes in inventories and work in progress

-81,726

85

Impact of changes in trade & other receivables

-122,323

-74,715

Impact of changes in trade & other payables

128,173

155,699

Change in w orking capital requirements on continuing operations (including employee benefits liabilities)

-75,876

81,069

The impact of changes in inventories and assets in progress (-€81.7 million) is primarily related to real estate development.

3.2.5.8 Other receivables

€ thousand

31/12/19

31/12/18

Variation

Government receivables

91.145

72.674

18.471

Other receivables

63.622

43.340

20.282

Security deposits received (short-term)

19.620

36.932

-17.312

Current accounts

929

925

4

Total

175.316

153.872

21.444

  • €91.1 million in government receivables comprise mainly VAT receivables. It should be noted that this item includes €3.2 million in government receivables following the payment of tax adjustments of which we dispute the validity (see Section 3.2.2.10.4).
  • The changes in receivables on disposals is mainly from the Italy Offices (-€16 million), Germany
    Residential (-€3.2 million), Other (+€3.2 million) and Hotels in Europe (-€1.3 million) segments.

Financial Report at 31 December 2019

46

COVIVIO

3.2.5.9 Cash and cash equivalents (available and restricted)

3.2.5.9.1. Accounting principles applicable to cash and cash equivalents

Cash and cash equivalents include cash, short-term deposits, and money-market funds. These are short-term, highly liquid assets that are easily convertible into a known cash amount, and for which the risk of a change in value is negligible.

3.2.5.9.2. Table of cash and cash equivalents

€ thousand

31/12/19

31/12/18

Money-market securities available for sale

626.477

509.261

Cash at bank

675.607

663.189

Total

1.302.084

1.172.450

At 31 December 2019, the portfolio of money-market securities available for sale consists mainly of Level 2 standard money-market collective investment vehicles (SICAV).

  • Level 1 of the portfolio corresponds to instruments whose price is listed on an active market for an identical instrument.
  • Level 2 corresponds to instruments whose fair value is determined using data other than the prices mentioned for Level 1 and observable directly or indirectly (i.e. price-related data).

Covivio holds no investments subject to capital risk.

3.2.5.10 Shareholders' equity

3.2.5.10.1. Accounting principles applicable to equity

  • Treasury shares

If the Group buys back its own equity instruments (treasury shares), these are deducted from shareholders' equity. No profit or loss is recognised in the income statement when Group equity capital instruments are purchased, sold, issued or cancelled.

3.2.5.10.2. Statement of changes in shareholders' equity

The statement of changes in shareholders' equity and movements in the share capital are presented in note 3.1.4.

3.2.5.11 Statement of liabilities

3.2.5.11.1. Accounting principles applicable to debt

Financial liabilities include borrowings and other interest-bearing debt.

At initial recognition, financial liabilities are measured at fair value, minus the transaction costs directly attributable to the issue of the liability. They are then recognised at amortised cost based on the effective interest rate. The effective rate includes the nominal rate and actuarial amortisation of issue expenses and issue and redemption premiums.

Financial Report at 31 December 2019

47

COVIVIO

Financial liabilities of less than one year are posted under "Current financial liabilities".

Convertible bonds (ORNANE-type) issued by Covivio group are either (i) recognised at fair value in the income statement or (ii) recognised separately as a financial liability at amortised cost and an embedded derivative measured at fair value in the income statement.

For Covivio, the fair value is determined according to the closing bond price.

Group companies hold movable and real estate assets through leases. At the lease commencement date, the tenant measures the rental liability as the present value of rents owing not yet paid, using the implied interest rate for the lease, if this rate can be easily determined, or otherwise using the incremental borrowing rate. This debt is amortised as the contracts expire and give rise to the recognition of a financial expense.

Rental liabilities are shown on the long-term or short-term rental liabilities line in the balance sheet and financial expenses in the Interest costs for rental liabilities line item.

  • Derivatives and hedging instruments

The Covivio group uses derivatives to hedge its floating rate debt against interest rate risk (hedging of future cash flows).

Derivative financial instruments are recorded on the balance sheet at fair value. The fair value is calculated using valuation techniques that use mathematical calculations based on recognised financial theories and parameters that incorporate the prices of market-traded instruments. This valuation is carried out by an external service provider.

The majority of the financial instruments in Italy Offices qualify for hedge accounting as defined by IFRS

9. In this case, changes in the fair value of the effective portion of the hedge are recognised net of tax in shareholders' equity until the hedged transaction occurs. The ineffective portion is recorded in the income statement.

All derivative instruments in the other segments are therefore recognised at their fair value, and changes are reflected in the income statement.

3.2.5.11.2.

Table of debt

Changes in

Change in

Other

€ thousand

31/12/2018

Increase

Decrease

exchange

31/12/2019

scope

changes

rate

Bank borrow ings

6 351 129

940 811

-1 463 733

42 421

22 091

-2

5 892 716

Finance lease borrow ing

17 099

0

-3 199

0

0

0

13 900

Other borrow ings

143 653

80 003

-79 553

40 260

13

-4 993

179 383

Treasury bills

1 271 400

92 500

0

0

0

0

1 363 900

Securitised loans

3 977

0

0

0

0

0

3 977

Non-convertible bonds

2 963 079

500 375

-226 900

0

0

0

3 236 554

Convertible bond issue(1)

347 249

0

-147 249

0

0

0

200 000

Subtotal interest-bearing loans

11 097 586

1 613 689

-1 920 634

82 681

22 104

-4 995

10 890 430

Accrued interest

46 446

54 723

-54 849

0

16

0

46 336

Deferral of loan expenses

-85 703

24 227

-8 182

0

27

-118

-69 749

Creditor banks

1 398

0

0

-245

3

19 392

20 548

Total borrow ings (LT/ST) excl. Fair Value of Ornane-type bonds

11 059 727

1 692 639

-1 983 666

82 436

22 150

14 280

10 887 566

of w hich Long-term

9 216 624

9 071 820

of w hich Short-term

1 843 103

1 815 746

Valuation of financial instruments

169 242

0

0

0

0

115 678

284 920

Convertible bond derivatives

18 803

0

0

0

0

-15 367

3 436

Total derivatives

188 045

0

0

0

0

100 311

288 356

of w hich Assets

-46 952

-77 486

of w hich Liabilities

234 997

365 842

Total bank debt

11 247 772

1 692 639

-1 983 666

82 436

22 150

114 591

11 175 922

  1. Convertible bond movements are presented in 3.2.5.11.4 - Convertible bonds.

New financings taken out during the fiscal year are presented in 3.2.2.2 - Liquidity risk and in 3.2.5.11.3 - Bank borrowings.

Financial Report at 31 December 2019

48

COVIVIO

Debt by type as at 31 December 2019 in €M:

10,890

The "Proceeds related to new borrowings" line item of the statement of Cash Flows (+€1,612.7 million) refers mainly to:

  • increases in interest-bearing borrowings (+€1,613.6 million)
  • increases in rental liabilities (+€7.5 million)
  • less new debt issuance costs (-€8.2 million).

The "Repayments of borrowings" line item of the Statement of Cash Flows (-€1,935.5 million) corresponds mainly to decreases in interest-bearing borrowings (-€1,920.6 million) and reductions in rental liabilities (-€14.9 million).

3.2.5.11.3. Bank borrowings

The table below outlines the characteristics of the borrowings taken out by Covivio group and the amount of the associated guarantees (principal amount over €100 million):

Financial Report at 31 December 2019

49

COVIVIO

Appraisal value

Outstanding

Nominal

Outstanding debt

debt

Date of

in € thousand

Debt

At 31 December

Initial

Maturity

(> or < €100m)

as at 31

signature

2019 (1)

December 2019

France Offices

€280M (2015) and €145M (2015) - Tour CB21 and Carré

29/07/15

280,000 and

29/07/2025 and

#REF!

407 300

and

Suffren

145,000

30/11/2023

01/12/15

€167.5M (2015) - DS Campus

#REF!

157 869

23/03/15

167 500

20/04/23

€300M (2016) - Orange

#REF!

300 000

18/02/16

300 000

30/06/28

> €100m

2 251 500

865 169

< €100m

354 120

166 633

Total France Offices

2 605 620

1 031 802

Italy Offices

€760M (2016) - Central

643 709

15/09/16

652 732

14/09/24

> €100m

1 414 296

643 709

Total Italy Offices

1 414 296

643 709

Hotels in Europe

€447 M (2013)

172 275

25/10/13

447 000

31/01/23

€255M (2012)- Mortgage bond

186 553

14/11/12

255 000

16/11/21

€278M (2017) - Rocca

220 085

29/03/17

277 188

29/03/25

€290M (2017) - OPCI B2 HI (B&B)

126 566

10/05/17

290 000

10/05/24

£400M (2018)- Rocky

467 965

24/07/18

475 145

24/07/26

€130M (2019) - Ref1

129 626

04/04/19

130 000

03/04/26

> €100m

2 996 442

1 303 070

< €100m

1 363 704

519 320

Total Hotels Europe

4 360 145

1 822 390

Germany Residential

Lyndon Immeo 01

107 957

12/12/11

140 000

29/01/27

Cornerstone

149 823

01/10/14

136 737

30/06/25

Refinancing Wohnbau/Dümpten/Aurélia/Duomo

108 828

20/01/15

150 000

30/01/25

Refinancing Amadeus/Herbstlaub/Valore/Valartis/Sunflow er

147 940

28/10/15

176 842

30/04/26

Quadriga

177 232

16/06/15

211 540

31/03/26

Golddust

109 545

23/03/16

115 000

30/04/27

Lego

170 103

24/06/16

195 003

30/09/24

Lyndon Immeo 02

169 885

26/01/17

230 000

14/03/22

Refinancing Indigo, Prime

259 188

09/07/19

260 000

30/09/29

Refinancing KG1

125 000

20/09/19

125 000

30/09/29

> €100m

3 911 707

1 525 501

< €100m

2 244 623

888 408

Total German Residential

6 156 331

2 413 909

TOTAL

14 536 392

5 911 809

COLLATERALISED

France Offices

Treasury bills BT/BMTN

1 363 900

€180M (2013) - Private investment

180 000

20/03/13

180 000

30/04/20

€500M (2016)- Green bond

500 000

20/05/16

500 000

20/05/26

€500M (2017)- Bonds

595 000

21/06/17

500 000

21/06/27

€500M (2019)- Green bond

500 000

17/09/19

500 000

17/09/31

> €100m

3 138 900

Total France Offices

3 651 151

3 138 900

Italy Offices

€500M (2014)- Bonds

125 000

30/03/15

125 000

30/03/22

€200M (2015) - Convertible bonds

200 000

03/08/15

200 000

31/01/21

€300M (2017) - Bonds

300 000

17/10/17

300 000

17/10/24

€300M (2018) - Bonds

300 000

20/02/18

300 000

20/02/28

> €100m

2 317 591

925 000

< €100m

3 977

Total Italy Offices

2 317 591

928 977

Hotels in Europe

€200M (2015) - Private investment

200 000

29/05/15

200 000

29/05/23

€350M (2018) - Edinburgh

350 000

24/09/18

350 000

24/09/25

> €100m

550 000

< €100m

181 429

Total Hotels Europe

1 782 296

731 429

Germany Residential

< €100m

Total German Residential

361 884

Other

< €100m

France Residential

25 905

0

Car parks

50 218

0

Total Other

76 123

0

TOTAL

8 189 044

4 799 306

UNENCUMBERED

Other payables

179 315

Overall Total

22 725 436

10 890 430

(1) The portfolio includes the fair value of occupied assets but does not include real estate inventories (trading, development) and the share of fair value of consolidated assets accounted for

by the equity method.

E

The borrowings are valued after their initial recognition at cost, amortised based on the effective interest rate.

Financial Report at 31 December 2019

50

COVIVIO

Breakdown of borrowings at their nominal value according to the time left to maturity and by interest- rate type: