Icade : Press Release - 2020 Full Year Results

PRESS RELEASE

Paris, February 22, 2021, 7:30 a.m.

ICADE: SOLID 2020 RESULTS DESPITE THE CRISIS,

NCCF ABOVE GUIDANCE,

POSITIVE OUTLOOK FOR 2021

Group: solid indicators, limited impact from the crisis

•  2020 revenue at €1.4bn (-5.4% vs. 2019)

•  Net current cash flow at €358m, i.e. €4.84 per share, above October 2020 guidance

•  EPRA NTA at €93.2 per share, +1.1% (cum dividend)

•  2020 dividend1: stable at €4.01 per share

Property Investment: rental income growth, resilient portfolios

•  Gross rental income on the rise: €678m, +6.7%, +2.0% like-for-like

•  Average annual rent collection rate for both Property Investment Divisions close to 99%

•  Property portfolio of €11.8bn (€14.7bn on a full consolidation basis), up +2.2% year-on-year (-2% like-for-like)

Property Development: an unprecedented 2020, rebound expected in 2021

•  Economic revenue of €825m, -15% year-on-year, impact of 2.5-month site shutdowns

•  Orders up2 +8% and notarised sales up +15% year-on-year

•  Backlog of €1.4bn, up +14%, driven by the residential segment (+21%)

Positive outlook for 2021*

•  2021 Group net current cash flow per share: expected to grow by ~+3%, (excluding the impact of 2021 disposals)

•  2021 dividend: expected to increase by +3%: payout ratio in line with 2020 (83%) + distribution of part of the gains on disposals

* assuming the health and economic situation remains stable

"Icade delivered solid results in 2020 despite an unprecedented health and economic crisis, demonstrating the strength of its fundamentals and relevance of its diversified business model. The Property Investment Divisions have been particularly resilient-gross rental income went up by +6.7%, with an almost +14% increase recorded by the Healthcare Property Investment Division. While it is true that the Property Development business suffered from the sudden shutdown of its construction sites, demand is still present. The Division's p ositive sales momentum is reflected in its operational indicators, such as orders and sales, up by +8% and +15% respectively on a year-on-year basis. The fact that our financial structure remains very strong is just one more advantage that has helped us get through this challenging period. Our outlook for 2021 is positive with NCCF expected to increase by 3% excluding the impact of disposals with dividends also expected to rise by 3%. We have full confidence in the Group's ability to deliver value for its shareholders over the medium term."

Olivier Wigniolle, CEO of Icade

• 1 Subject to approval at the General Meeting to be held on April 23, 2021

• 2 In value terms

At its meeting held on Friday, February 19, 2021, Icade's Board of Directors chaired by Mr Frédéric THOMAS approved the financial statements for the year 2020:

12/31/2020

12/31/2019 Change 2020 vs. 2019 (%)

Revenue (in €m)	1,440.2	1,522.9 -5.4%
Adjusted EPRA earnings from Property Investment (in €m) Adjusted EPRA earnings from Property Investment per share	351.0	358.7 -2.2% 4.85 -2.1%
4.74
Net current cash flow from Property Development (in €m)	2.5	33.1 -92.4%
Group net current cash flow (in €m) Group net current cash flow per share	358.3	389.2 -7.9% 5.26 -7.9%
4.84
Net profit/(loss) attributable to the Group (in €m)	24.2	300.2 -91.9%

12/31/2020	12/31/2019
EPRA NTA per share	€93.2	€96.1	-3.1%
Average cost of drawn debt	1.48%	1.54%	-6 bps
LTV ratio (including duties)	40.1%	38.0%	+210 bps

Change (%)

1. Impact of the health and economic crisis

The impact of the crisis on Group NCCF for 2020 stood at -€27m, mainly relating to Property Development, with the closure of construction sites making it impossible to recognise revenue for 2.5 months:

•  c. -€6m for Office Property Investment: mainly due to delays and postponements in the completion of assets from the development pipeline, together with conditional measures to support tenants;

•  c. -€2m for Healthcare Property Investment: a very limited impact, mainly relating to delays in investments and acquisitions;

•  c. -€19m for Property Development: mainly due to the effect of construction site shutdowns (2.5 months on average) on revenue recognition using the percentage-of-completion method. As a reminder, 90% of the NCCF impact is expected to be pushed back in 2021 and subsequent years.

In addition, inefficiency costs, exceptional rent waivers (for small businesses) and asset impairment in the Office Property Investment Division as a result of the Covid-19 crisis reduced net profit by c. -€52m, bringing the total impact of the crisis on 2020 net profit attributable to the Group to -€79m.

2. 2020 performance by business line

2.1. Office Property Investment: resilient leasing activity and proactive crisis management

A business supported by a solid tenant portfolio and dynamic asset management

Gross rental income of €377m, up +2.3% on a like-for-like basis:

•  On a reported basis, gross rental income from offices and business parks rose by +4.8%3:

The impact of significant disposals in 2019 (over €1.1bn) was offset by an acquisition in H2 2019 and the completion of 11 assets from the development pipeline over the last 24 months. These assets included Pulse (Portes de Paris business park), B007 (Pont de Flandre, 19th district of Paris), Quai Rive Neuve (Marseille) and Park View (Lyon), completed in October 2020. Park View is the only asset completed in 2020 that has yet to be fully leased. Visits are currently being conducted to ensure that leases are in place for the entire building by the end of 2021.

•  On a like-for-like basis, gross rental income from offices and business parks continued to grow by +2.5%, driven by index-linked rent reviews and resilient leasing activity in the context of a difficult year 2020, illustrating the strength of Icade's office tenant profiles:

  • o 88% of rental income comes from large companies, listed companies, public sector companies, government agencies and middle-market companies;

  • o In addition, Icade's approximately 860 tenants represent a wide range of industries. The Company therefore benefits from limited exposure to the sectors most affected by the crisis. The tourism, hotel and transport industries represent only around 12% of the tenant portfolio.

Average annual rent collection rate of nearly 98%.

3 It should be noted that the Eqho Tower is fully consolidated in the Group's financial statements.

During the period, 160 leases were signed or renewed, representing almost 160,000 sq.m:

•  The new leases signed were for an overall floor area of 60,543 sq.m (of which more than 45,000 sq.m became effective in 2020), with annualised headline rental income of €13m and a WAULT to first break of 6.4 years. Of particular note were leases for 12,500 sq.m in Park View (Lyon), nearly 9,000 sq.m in the Rungis business park and over 3,000 sq.m in the Initiale Tower4 (La Défense).

•  During the period, 54 leases were renewed, representing a floor area of roughly 98,000 sq.m. These renewals secured annualised headline rental income of €24.4m, with a WAULT to first break of 7 years.

The support measures granted to some of our tenants in 2020 in light of the Covid-19 crisis consisted of financial support, mainly in the form of rent-free periods, with the tenants in turn agreeing to extend their lease term, which secured future rental income.

The renewals thus extended the WAULT to break of the leases concerned by an average of 2.9 years.

Thanks to proactive crisis management, more than 80% of 2021 break options are estimated to have been prevented5 or covered by the signing of new leases.

The financial occupancy rate stood at 92.5% as of December 31, 2020, stable compared to December 31, 2019.

 The occupancy rate for offices was 94.9% (vs. 96.4% as of December 31, 2019), mainly due to the inclusion of Park View (Lyon)

in the portfolio, 50% of the floor area of which is in the process of being let;  The occupancy rate for business parks was 86.9% (vs. 83.6% as of December 31, 2019), driven in particular by the full occupancy of the Pulse building from 2020.

The weighted average unexpired lease term to first break stood at 4.1 years as of December 31, 2020.

Portfolio value stable year-on-year, down slightly on a like-for-like basis

As of December 31, 2020, the Office Property Investment portfolio was worth €8.5bn on a proportionate consolidation basis, stable year-on-year (-0.3%) in the context of a slowdown in investments over the period (no acquisitions, investments in the development pipeline scaled back due to the uncertain 2020 environment).

On a like-for-like basis, the value of the portfolio was down -3.1%, mainly due to operating assets, for which the external valuers revised some of their assumptions (index-linked rent reviews, time needed to find tenants).

 The office portfolio was valued at €6.4bn, up +0.3% on a reported basis, and down -2.7% like-for-like.  The business park portfolio was worth €1.8bn, down -1.5% on a reported basis and -4.6% like-for-like.

On a full consolidation basis, the portfolio was valued at €9.0bn.

A more secure development pipeline, adapted to the market environment

Investments over the period totalled nearly €279m, down -48% year-on-year, with in particular:

•  Investments in the development pipeline and off-plan sale projects for €206m, mainly ~€68m in Origine (Nanterre), ~€33m in Fresk (Paris/Issy-les-Moulineaux) and ~€25m in Park View (Lyon), completed in October 2020;

•  "Other capex" and "Other" for ~€73m relating to building maintenance work and tenant improvements.

  Nearly €10m of this amount will be used to meet our CSR commitments, particularly our goals to reduce GHG (carbon) emissions.

In addition, Icade has pragmatically adjusted the sequencing of its pipeline investments in view of the current environment and in anticipation of the recovery:

•  Main focus on projects in the development pipeline worth €1.5bn, with a residual investment of €408m over the next four years;

•  €826m relate to projects scheduled for completion in 2021, 63% of which have already been pre-let;

•  Additional opportunities worth €900m for projects ready to be launched when the market recovers and/or pre-lets are secured.

Asset rotation slowed down after a record year in 2019

After a volume of disposals of €1.1bn in 2019, no significant disposals had been planned or budgeted for in 2020.

• 4 33%-owned by Icade

• 5 To date, over 80% of leases with a break option in 2021 have been renewed early, are likely be renewed according to the Asset Management Department's estimates or are covered by new leases coming into effect.

2.2. Healthcare Property Investment: further growth, a non-cyclical asset class

Strong healthcare tenants little affected by the crisis

•  85% of rental income was generated by healthcare companies with revenue in excess of €500m.

•  Supported by exceptional government measures since the start of the crisis, frontline healthcare providers have only been marginally impacted by the crisis from a financial standpoint. Short- and medium-term care facilities (87% of portfolio value) are supported by a predominantly publicly funded (>90%) healthcare system.

•  Long-term care facilities (13% of portfolio value) have withstood the crisis very well. The occupancy rate for the facilities declined only slightly (to 95% on average), with no impact on the Healthcare Property Investment Division's rental income.

The rent collection rate in 2020 was over 99%.

Robust leasing activity

Gross rental income totalled €301m as of December 31, 2020, up c. 14% (+€37m), driven mainly by acquisitions in France and abroad since H2 2019 (+€15m and +€16m, respectively).

On a like-for-like basis, this represented an increase of +1.7%.

The financial occupancy rate of the portfolio as of December 31 remained unchanged at 100%.

In addition, the weighted average unexpired lease term to first break was 7.4 years: 6.7 years for assets located in France and 15.9 years for assets located abroad.

Continued expansion: €440m6 of acquisitions completed in 2020 (incl. preliminary agreements signed)

Investments remained strong, with almost €440m in transactions, including:  Nearly €250m of asset acquisitions, generating rental income immediately, both in France and abroad:

•  Acquisitions in France for nearly €100m, including:

  • o A nursing home operated by ORPEA in Marseille for €22.6m7 (in July 2020);

  • o The Navarre polyclinic in Pau for €36.2m (in November 2020);

  • o The acquisition from Korian in December of four nursing homes for €33.6m as part of the partnership entered into in 2017.

•  International acquisitions for €149m, including:

  • o The Q4 acquisition of seven nursing homes in Germany for €107m8 as part of the acquisition of nine healthcare facilities in France and Germany from the operator ORPEA;

  • o The acquisition of two long-term care facilities in Italy for close to €35m from Gheron and Lagune International, both operated by Gheron.



Nearly €190m of preliminary agreements signed, including €150m abroad:

•  €117m in connection with the acquisition of a portfolio of nursing homes (two existing and four under construction) in northern Italy;

•  €36m for a preliminary agreement for an asset in Germany included as part of the transaction with the operator ORPEA;

•  €37m for off-plan acquisitions and property development contracts in France, including €22m for the off-plan acquisition of a healthcare facility.

With these investments, 60% of the €2.5bn Investment Plan was completed as of the end of 2020.

As of December 31, 2020, the development pipeline had grown significantly- €451m, up +55% year-on-year:

This development pipeline of nearly €451m as of December 31, 2020, of which €264.4m abroad, will eventually generate a total of €25m in additional rental income (expected average net initial yield: 5.5%).

This pipeline is fully pre-let.

Portfolio value up +9.2% year-on-year, +1.1% like-for-like, healthcare assets emerge stronger from the crisis and further prove their appeal

As of December 31, 2020, the Healthcare Property Investment portfolio was worth €3.3bn on a proportionate consolidation basis (€5.7bn on a full consolidation basis), i.e. +€279m.

•  The +9.2% increase on a reported basis was mainly driven by the acquisition of 19 assets in 2020, bringing the number of healthcare properties to 175 as of December 31, 2020, including 139 in France.

•  On a like-for-like basis, the portfolio grew by +1.1%, reflecting the resilient and non-cyclical nature of the healthcare asset class, which continues to attract strong investor interest both in France and elsewhere in Europe.

• 6 On a full consolidation basis

• 7 as part of preliminary agreements signed with ORPEA to acquire a property portfolio in France and Germany

• 8 On a full consolidation basis; €88m based on proportionate consolidation of IHE