Chat with this content: Summary, Analysis, News...
Share on Reddit
Covivio: Europe's Living Real Estate Empire
I. Introduction & Episode Roadmap
Picture the gray industrial landscape of Lorraine, France, in the late 1980s—a region that had watched its steel mills close one by one, leaving behind a patchwork of abandoned factories and displaced workers. Into this environment of decay and dislocation stepped Charles Ruggieri, the son of an Italian steelworker who had emigrated to France so his children could pursue education. A graduate of the University of Strasbourg's law faculty, Ruggieri would later describe himself as a "pure product of the social elevator"—a scholarship student who built his fortune through a passion for creating and developing companies.
What Ruggieri built, initially from the rubble of industrial restructuring, would eventually transform into one of Europe's most significant real estate platforms. Today, Covivio stands as a benchmark in the European real estate market with €23.1 billion in assets, offering support to companies, hotel brands, and territories in their pursuit of attractiveness, transformation, and responsible performance.
The company operates three core businesses: offices (approximately 50% of its total portfolio by mid-2024), residential properties in Germany (30%), and hotels (20%). This diversified model—spanning Paris offices to Berlin apartments to Mediterranean resort hotels—represents a distinctive approach in a sector where most competitors have pursued razor-sharp specialization.
But here's where the story becomes truly fascinating: How did a small regional French real estate firm from Metz become one of Europe's largest pan-European property players, backed by Italian eyewear billionaires? Through Leonardo Del Vecchio's holding company, Covivio's largest shareholder became the founder of Luxottica—the world's largest producer of glasses and frames—who held a 28% stake in the French property management company.
The connection between Ray-Ban and European real estate is one of the most unusual corporate genealogies in the sector. It's a story of transformative M&A, the power of patient capital, a single CEO who has guided the company for over two decades, and the strategic repositioning of a €23 billion portfolio in response to seismic shifts in how we work, travel, and live.
II. Origins: From Batibail to Foncière des Régions (1998-2006)
The roots of what would become Covivio trace back to a region in crisis and a man who saw opportunity where others saw only decline.
Charles Ruggieri created Batipart as a family-run group with its roots in the restructuring and management of residential properties in France, mainly in the northeast Lorraine region. Batipart undertook property conversion and development through various companies: Immobilière Batibail, then Covivio (formerly Foncière des Régions), and finally Eurosic between 2011 and 2017.
During the 1980s and 1990s, Ruggieri directed three companies that emerged from the restructuring of the Lorraine steel industry: Immobilière Thionvilloise (later Batibail), Bail Industrie (focused on industrial brownfields), and Batigère (social housing). "I understood that I needed to participate in the capital to have a voice at the table," Ruggieri later recalled. "So in 1987, I proposed to the staff to create a company, and 300 collaborators (90% of staff) trusted me to accompany them and enter into the capital." This became the investment company Batipart.
Covivio (formerly Batibail and Foncière des Régions) is a French real estate company founded in 1998. Batibail was created in 1998 in Metz by Charles Ruggieri. In 2002, the company was renamed Foncière des Régions.
The timing of this evolution proved propitious. France had introduced the SIIC regime—the Société d'Investissement Immobilier Cotée—largely inspired by the American REIT model. The SIIC regime provides for a full exemption from corporation tax on profits deriving from real estate investments (rents and capital gains), provided that certain distribution obligations are fulfilled: 95% of net rents, 60% of capital gains, and 100% of dividends received from SIIC subsidiaries.
This tax-efficient structure created a powerful vehicle for real estate consolidation and growth—exactly the opportunity that a strategic operator like Ruggieri was positioned to exploit.
Charles developed the Batigère group, a social housing group, which he led from 1985 to 1995. In the early 2000s, he created Covivio (formerly Foncière des Régions) and made it one of Europe's leading property companies, chairing the Supervisory Board from 2001 to 2010.
Into this emerging platform stepped a figure who would shape the company for the next quarter-century: Christophe Kullmann. Kullmann joined the company in 2001 as the Chairman of the Management Board. He had served as the Finance Director at Immobilière Batibail from 1992 until its merger with Gecina in 1999, when he became Chief Financial Officer at Gecina.
At the head of Covivio since its founding in 2001, Christophe Kullmann is CEO and Member of the Board of Directors. A founding member of the Palladio Foundation with Covivio, he is also Chairman of the Fédération des Entreprises Immobilières.
The continuity of leadership would prove to be one of Covivio's defining characteristics—Kullmann's tenure of over two decades stands in stark contrast to the revolving-door management of many public companies. This stability allowed for the patient execution of multi-year strategies that would transform a regional French operator into a pan-European champion.
The early 2000s marked a critical inflection point for Foncière des Régions as it began aggressive expansion through acquisition. In 2004, it took control of the property company Bail Investissement, which according to Le Monde had assets worth €1.5 billion.
The significance of this transaction was not just scale but capability—Bail Investissement brought expertise in commercial real estate that complemented Foncière des Régions' residential roots. This would become the template for Covivio's growth: targeted acquisitions that added new competencies while achieving scale efficiencies.
For investors: The SIIC structure represents both opportunity and constraint. The mandatory dividend distribution (95% of rental income) means Covivio operates as a yield vehicle, limiting retained earnings for growth but providing visible cash returns. The tax efficiency accrues primarily to shareholders rather than the corporate level—a key distinction from growth-oriented technology companies that reinvest profits.
III. The Consolidation Era: Building European Scale (2004-2007)
The mid-2000s marked Foncière des Régions' transformation from a successful French operator into a truly European platform. This wasn't merely geographic expansion—it was a fundamental reshaping of the company's business model and strategic positioning.
Foncière des Régions took part in structuring the growth operation that notably involved the outsourcing of properties by institutions (EDF, France Télécom—the creation of Foncière des Murs resulting from hotel acquisitions from Accor). These sale-leaseback transactions with major French corporations and hospitality operators represented sophisticated financial engineering—acquiring real estate from companies that preferred to redeploy capital to their core businesses while locking in long-term lease arrangements.
The hotels business, which would later become a cornerstone of Covivio's diversification strategy, emerged from these early deals. Foncière des Murs (later renamed Covivio Hotels) was created as a dedicated hotel real estate subsidiary. The partnership model—acquiring properties and leasing them back to major hotel operators under long-term agreements—established a template that would prove highly profitable and relatively defensive.
But the most consequential move of this era was the Italian expansion. In 2007, Foncière des Régions acquired Beni Stabili, a major player in the Italian real estate market, as well as the CB21 Tower.
The Beni Stabili acquisition was significant for multiple reasons. Beni Stabili was established in Rome in 1904, and after several changes of ownership, the company went to the group of Leonardo Del Vecchio. Through this transaction, Foncière des Régions gained not only a substantial Italian portfolio but also a relationship with one of Europe's most significant family fortunes—a relationship that would reshape its shareholder base for decades to come.
The strategic logic was clear: the Italian office market, particularly Milan, offered attractive fundamentals and a sophisticated tenant base of multinational corporations and Italian industrial champions. Unlike the heavily developed Parisian market, Milan presented meaningful development opportunities in emerging business districts.
By 2007, Foncière des Régions had assembled the building blocks of a diversified, pan-European real estate operator: French offices, German residential (through earlier acquisitions), Italian commercial properties, and a growing hotel portfolio. The timing of this expansion would soon be tested by forces no one fully anticipated.
For investors: The pre-2008 expansion illustrates both the opportunity and risk of leverage in real estate. Foncière des Régions financed its growth with debt, betting on continued appreciation and stable rental income. While the strategy ultimately succeeded over the long term, the intervening crisis would reveal the dangers of aggressive expansion at cycle peaks.
IV. The 2008 Financial Crisis: Surviving the Real Estate Collapse
The global financial crisis that erupted in 2008 tested every assumption underlying Foncière des Régions' growth strategy. The following year, during the 2008 financial crisis, the office market collapsed, with the La Défense business district near Paris particularly hard hit.
La Défense—the gleaming high-rise business district west of Paris—epitomized the vulnerabilities of commercial real estate in a downturn. Large floor plates, institutional tenants, and premium rents that had seemed like advantages in the boom suddenly became liabilities as major corporations consolidated space, renegotiated leases downward, or simply walked away from expansion plans.
The broader European real estate market faced similar challenges. The 2008 financial crisis, also known as the global financial crisis, was a major worldwide financial crisis centered in the United States. The causes included excessive speculation on property values by both homeowners and financial institutions, leading to the housing bubble. The first phase of the crisis was the subprime mortgage crisis, which began in early 2007, as mortgage-backed securities tied to U.S. real estate collapsed in value. A liquidity crisis spread to global institutions by mid-2007 and climaxed with the bankruptcy of Lehman Brothers in September 2008, which triggered a stock market crash and bank runs in several countries.
For European commercial real estate operators like Foncière des Régions, the crisis manifested through multiple channels: declining property valuations that pressured balance sheets, tenant failures that created vacancy and collection issues, and frozen capital markets that made refinancing difficult and expensive.
Yet Foncière des Régions navigated the crisis without catastrophic consequences. The diversification that had been assembled in the preceding years—spanning geographies, asset classes, and tenant types—provided natural hedging. German residential, with its rent-controlled but stable income streams, proved more defensive than cyclical French offices. The long-term lease structures with hotel operators maintained cash flows even as hospitality demand collapsed.
The crisis also taught lessons that would shape Covivio's future strategy. The dangers of peripheral office locations, where vacancies spiked most dramatically, informed a subsequent "flight to quality" toward city-center assets. The importance of balance sheet flexibility, evidenced by companies that faced liquidity crises, embedded conservative financing principles into the company's culture.
Perhaps most significantly, the crisis set the stage for the next phase of consolidation. In November 2010, Foncière des Régions Chairman Charles Ruggieri cut his stake in the company, France's second-largest publicly traded office landlord, and stepped down to be replaced by Jean Laurent. Batipart, Ruggieri's investment company, raised €180 million selling shares to FDR's other main holders, reducing its stake to 7.2% from 11.5%.
This transition marked the end of the founding era and the beginning of Covivio's evolution as an independently managed, institutionally owned platform. The Italian connection through Beni Stabili—and Leonardo Del Vecchio's Delfin—would increasingly define the shareholder base.
For investors: The 2008 crisis demonstrated that diversification in real estate is more than geographic spread—it encompasses asset class mix, lease duration, and tenant quality. Covivio's survival positioned it for opportunistic growth in the recovery, but the memory of the crisis continues to influence management's conservative approach to leverage.
V. Strategic Reshaping: From Generalist to Specialist (2010-2017)
The post-crisis decade witnessed Foncière des Régions' deliberate transformation from a diversified property company into a focused operator with clear strategic priorities. This wasn't just portfolio optimization—it was a fundamental rethinking of where value creation occurs in European real estate.
In 2014, Foncière des Régions sold logistics assets worth €473 million to the American investment company Blackstone.
The logistics disposal was revealing. Rather than simply pruning underperforming assets, management made a strategic decision to exit an entire sector—one that would subsequently enjoy substantial growth driven by e-commerce demand. The decision reflected a disciplined focus: logistics real estate requires specialized expertise in tenant relationships, facility design, and supply chain dynamics. Foncière des Régions concluded it could create more value by concentrating resources on offices, hotels, and residential properties where it had competitive advantages.
By 2016, it was one of Europe's leading real estate companies, with assets estimated at €19 billion.
The German residential business became increasingly important during this period. In Germany, Covivio owns over 40,000 housing units valued at a total of €7.2 billion and is focusing on the country's busiest cities, including Berlin, Dresden, Hamburg and Leipzig, and the Ruhr region.
German residential represented a defensive asset class with distinctive characteristics. Rent regulation limited upside but also protected downside during economic contractions. The highly fragmented ownership structure in German cities meant that patient consolidation could yield meaningful portfolios in supply-constrained markets. And Berlin's evolution from reunified city to creative hub to tech destination created long-term tailwinds for residential demand.
The Immeo SE was a German real estate group with headquarters in Essen and administrative offices in Oberhausen. Since June 2018, it belongs to the French real estate company Covivio. The group, later converted to Immeo SE, acquired properties in Berlin, Potsdam, Dresden, Leipzig, and Hamburg from 2011. The conversion to SE (Societas Europaea) and the French shareholders of the Immeo Group were an expression of the European orientation. On June 1, 2018, Immeo was merged with Foncière des Régions under the name Covivio.
The hotels strategy also matured during this period. Covivio Hotels is also joint shareholder and asset manager for a further 60 hotels let to AccorInvest and held via two joint ventures, established in 2010 and 2014 respectively: one is 80% held by Crédit Agricole Assurances and 20% by Covivio Hotels, while the other is held by la Caisse des Dépôts, Société Générale Assurances and Covivio Hotels.
These joint ventures with major French institutional investors demonstrated Covivio's ability to structure partnerships that enhanced returns while managing capital requirements. By partnering with insurance companies and pension funds on hotel acquisitions, Foncière des Régions could pursue larger transactions while spreading risk and generating asset management fees.
The strategic pivot toward "centrality"—a term that would become central to Covivio's vocabulary—emerged from this period. Analysis of rental dynamics showed that offices in city centers consistently outperformed suburban and peripheral locations in tenant retention, rental growth, and valuation stability. This insight would drive billions of euros in portfolio repositioning over the subsequent decade.
For investors: The 2010-2017 period illustrates disciplined capital allocation—selling logistics before the sector's boom might seem like poor timing, but management's focus on areas of competitive advantage proved correct. The lesson: specialized expertise generates better risk-adjusted returns than diversification for its own sake.
VI. The Beni Stabili Merger & Covivio Rebrand (2018)
The events of 2018 transformed Foncière des Régions into Covivio—not merely a name change but a fundamental reconstitution of the company's identity, ownership structure, and strategic positioning.
In 2018, Foncière des Régions became Covivio.
The rebrand from "Foncière des Régions"—literally "Regional Property Company"—to "Covivio" signaled geographic and conceptual expansion. The new name combined the Latin prefix "co" (together) with "vivio" (life), capturing the company's evolving self-conception as an operator of "living real estate" rather than simply a landlord of buildings.
But the rebrand was catalyzed by something more fundamental: the full merger with Beni Stabili.
Covivio Extraordinary General Meeting approved the merger with Beni Stabili, based on an exchange ratio of 8.5 Covivio shares for 1,000 Beni Stabili shares, with favorable votes of approximately 99.7% of share capital represented at the meeting. The merger was approved by Beni Stabili Extraordinary General Meeting, with favorable votes of approximately 99.9% of share capital represented at the meeting. The merger, completed at the end of 2018, was in direct continuation with Beni Stabili's transformation plan initiated two years ago and further reinforced Covivio's investment strategy in Italy, focused on Milan and the development pipeline. It was also a major step towards Group simplification allowing to increase ties between Covivio's different divisions.
On January 2, 2019, the new shares debuted on the Milan and Paris stock exchanges. The merger was effective at midnight on December 31, 2018, based on a share exchange ratio of 8,245 Covivio shares for every 1,000 Beni Stabili shares. Covivio CEO Christophe Kullmann commented: "We plan to focus on Italy, especially on Milan, and to simplify the structures. The market greatly supported the merger." The group kept the Italian headquarters and pursued a strategy based on three major European cities: Paris, Milan, and Berlin.
The merger brought an unexpected protagonist to Covivio's shareholder register: Leonardo Del Vecchio, the founder of Luxottica and one of Italy's wealthiest individuals.
Leonardo Del Vecchio (May 22, 1935 – June 27, 2022) was an Italian billionaire businessman, the founder and chairman of Luxottica, the world's largest producer and retailer of glasses and frames, with 77,734 employees and over 8,000 stores. At the time of his death, his net worth was estimated at US$24.1 billion, making him the second richest person in Italy and 54th in the world. Del Vecchio was born in Milan to an impoverished family from Barletta, Southern Italy. His father was a street vendor of vegetables who died before his birth, and his mother already had four other children; he grew up in an orphanage. He began his career as an apprentice to a tool and die maker in Milan but decided to turn his metalworking skills to make spectacle parts. In 1961, he moved to Agordo in the province of Belluno, which is home to most of the Italian eyewear industry.
The rags-to-riches narrative of Del Vecchio—from orphanage to founder of a €50+ billion eyewear empire—paralleled in some ways the regional-to-continental trajectory of Covivio itself. His involvement wasn't passive: Delfin has a 27% stake in Paris-listed Covivio after Del Vecchio in 2018 merged his Italian property firm Beni Stabili with French rival Fonciere des Regions.
This concentration of ownership in the hands of a patient, long-term investor proved strategically significant. Unlike public shareholders with quarterly performance horizons, Del Vecchio's family office had demonstrated willingness to hold positions for decades—evident in his approach to Luxottica. For a real estate company pursuing multi-year development projects and cycle-long positioning strategies, such anchor ownership provided crucial stability.
Real estate: Major shareholder in Covivio (≈28%).
Also in 2018, the company launched its flexible office initiative. Covivio founded Welli, a dedicated flexible offices and co-working offering, as demand for workplace flexibility accelerated across European markets. This move anticipated—though didn't fully foresee—the transformation that COVID-19 would force upon office usage patterns just two years later.
In December 2018, the merger between Covivio and Beni Stabili was completed, thus furthering the simplification of the Group structure realized in 2017 and 2018. The ownership rate in the Italian portfolio is therefore 100% at end-2018 (vs 59.9% at end-June 2018 and 52.4% at end-2017).
The simplified structure eliminated minority interests that had complicated capital allocation decisions and created accounting complexity. Full ownership of Italian operations allowed unified strategic direction and more efficient management of the Milan portfolio.
For investors: The Del Vecchio/Delfin anchor represents both opportunity and risk. Patient capital supports long-term strategy execution, but concentration creates governance considerations and potential succession complexity. The 2022 death of Del Vecchio would test whether family ownership could maintain the same strategic discipline.
VII. COVID-19 Pandemic: Testing the Diversified Model (2020-2021)
The COVID-19 pandemic delivered the most severe test of Covivio's diversified business model since the 2008 financial crisis—and revealed both the resilience and vulnerabilities of its strategic positioning.
According to STR, a leading hotel operation data provider, the average hotel occupancy rates for June 2020 reduced by 68.9%, 72.8%, 71.4%, 43.0%, 72.6%, and 42.9% in the U.S., Europe, Canada, Asia Pacific, Africa, and the Middle East, respectively, compared to June 2019.
The hotel association estimated that the COVID-19 pandemic eliminated more than 10 years of job growth in the accommodations sector. Hotel occupancy averaged 66% in 2019 but fell to a historic low of 24.5% in April 2020.
The hotel business, representing approximately 20% of Covivio's portfolio, faced devastation. Travel restrictions, lockdowns, and consumer fear collapsed demand virtually overnight. Covivio's lease structures with major hotel operators—designed to provide stable income in normal times—suddenly became focal points for renegotiation as operators struggled to survive.
Since the World Health Organization declared COVID-19 a global pandemic in March 2020, hotels worldwide have seen precipitous declines in occupancy. North American hotels closed 2020 with a 43 percent occupancy and a RevPAR decline of 48 percent in the same year, according to Smith Travel Research. Hotel closures, layoffs and furloughs resulted in 8.3 million lost jobs in just March and April 2020, and 498,000 jobs lost in December 2020.
Yet the diversified model provided crucial ballast. German residential—stable, rent-regulated, and serving essential housing needs—maintained income throughout the crisis. Office properties, while facing questions about long-term demand, continued generating rental income from locked-in leases with corporate tenants who, though working remotely, remained legally obligated to pay rent.
The company used the crisis period for strategic repositioning. Covivio acquired Nice's iconic Plaza, transforming it into the Anantara Plaza Nice Hotel—a bet on premium leisure travel that would prove prescient as pent-up demand emerged from lockdowns.
The pandemic also accelerated trends that reshaped Covivio's strategic priorities. The "flight to quality" in offices intensified as companies discovered that employees would return to well-designed, centrally located workplaces with modern amenities—but not to aging suburban buildings with poor transportation access. Post-COVID: 69% of offices are located in city centers, up from 59% at the end of 2020. The remainder now consists mainly of core assets in major business hubs, 93% let with a 6.1 years firm lease maturity.
Since 2020, Covivio completed €2.1 billion in disposals, 80% of them in offices, and invested €1.4 billion mainly through capital expenditure on its assets. This qualitative rotation process enabled the company to refocus the portfolio and adapt to changes in the rental market.
The German residential segment demonstrated its defensive characteristics. Even as the broader economy contracted, housing remained essential. Berlin's structural housing shortage meant that vacancies were minimal, and rent collection remained near-normal levels.
For investors: COVID-19 validated diversification as a risk management strategy while revealing the importance of asset quality within each segment. The post-pandemic period would see Covivio accelerate the "quality rotation" that the crisis had made essential.
VIII. The Interest Rate Shock & Strategic Reset (2022-2023)
If COVID-19 tested operational resilience, the interest rate shock of 2022-2023 tested financial resilience—and forced a fundamental strategic reset that would position Covivio for the next cycle.
"In a real estate environment marked by rising interest rates and a slowdown in the investment market, Covivio is rapidly adapting. The €350m of new disposal agreements as well as the scrip dividend further reinforce the balance sheet's solidity. Meanwhile, strong like-for-like revenue growth of 7.6% has allowed us to raise our recurring net income guidance for 2023."
At end-2022, in an environment impacted by inflation, rising interest rates and dropping values, Covivio had adjusted its strategy, announcing (i) a €1.5bn disposal plan, (ii) a reduction in investments, with a focus on the most central areas, and (iii) the target of increasing revenues on a like-for-like basis.
The European Central Bank's aggressive rate increases—from negative territory to over 4%—represented the fastest monetary tightening in the ECB's history. For real estate companies that had enjoyed decades of declining financing costs, the reversal was severe. Property valuations, inversely correlated with discount rates, contracted sharply.
Covivio's net income totaled -€1.4 billion, impacted by the decline in values. Adjustments to asset values are reflected in the change in net tangible asset value (EPRA NTA), which was down 21% year-on-year at €84.1 per share (or €8,470 million). Net Disposal Value (EPRA NDV) was down 23% at €83.4 per share.
The paper losses were substantial but not existential. Covivio's conservative financing policies—maintaining diversified debt sources, extending maturities, and hedging interest rate exposure—limited cash flow impacts. Debt has an average maturity of 4.9 years (vs 4.8 years at end-2022) and is largely protected against rising interest rates: hedging ratio of 92% and average hedging instrument maturity of 5.9 years. Despite the spike in market interest rates, the average interest rate of Covivio's debt remained under control at 1.50%, vs 1.24% at end-2022.
The disposal program was executed with discipline. Two years later, Covivio successfully implemented this action plan: €1.5 billion in new disposal agreements have been secured.
Recurring net income (adjusted EPRA Earnings) was up +10% to €477.4 million (stable per share, at €4.47). With over €1 billion invested over the year, the Group seized new growth opportunities, particularly in the hotel sector, while finalizing its €1.5 billion disposal plan. The Group's excellent operating performance implied a +10% growth in recurring earnings in 2024.
Adding complexity to this period was the death of Leonardo Del Vecchio in June 2022—the patriarch whose patient capital had anchored Covivio's shareholder base.
Upon Leonardo Del Vecchio's death on June 27, 2022, in Milan, his will provided for an equal division of Delfin S.à r.l.—the family holding that owns all the equity interests and liquidity of the Del Vecchio family—among his wife and children. According to an official statement by Delfin, each heir received a 12.5% stake in the company. The heirs are: Nicoletta Zampillo Del Vecchio (spouse), Claudio Del Vecchio, Marisa Del Vecchio, Paola Del Vecchio, Leonardo Maria Del Vecchio, Luca Del Vecchio, Clemente Del Vecchio, and Rocco Basilico, the son of Nicoletta Zampillo from her previous marriage. Del Vecchio did not designate a successor as Chairman of Delfin. In 2023, the Board elected Francesco Milleri as Chairman of Delfin S.à r.l., ensuring strategic continuity with the founder's vision.
The mechanism designed by Del Vecchio to prevent disagreements establishes that each decision must be made by at least 88% of the capital. In other words, it would not be enough to gather the 7 siblings who together own 87.5% of Delfin. The contribution of the eighth heir, the last wife, who holds the remaining 12.5%, is required.
This governance structure—requiring near-unanimity for major decisions—was designed to prevent hasty divestitures but also created potential for decision paralysis. For Covivio, the concern was whether Delfin would maintain its committed shareholder posture or gradually liquidate positions. Initial indications were positive: Francesco Milleri, who assumed Delfin's leadership, had been Del Vecchio's close confidant and appeared committed to strategic continuity.
For investors: The 2022-2023 period demonstrates the importance of balance sheet management in capital-intensive industries. Covivio's hedging policies, which might have seemed expensive in the zero-rate era, proved their value when rates normalized. The company emerged from the crisis with reduced leverage and enhanced portfolio quality.
IX. Hotels Strategy Pivot & AccorInvest Consolidation (2023-2024)
As Covivio emerged from the interest rate shock, hotels—once the segment most devastated by COVID-19—became the focal point of aggressive growth.
Christophe Kullmann CEO, Covivio: Nearly €1.1 billion in investments in 2024, of which 67% in hotels; €766m of new disposal agreements in 2024, at a +3% premium to appraisal values; Hotels: reinforcement in Covivio Hotels, completion of the asset swap with AccorInvest and acquisition in Southern Europe.
The strategic rationale was straightforward: tourism had rebounded faster and stronger than expected from COVID-19 lockdowns. Pent-up demand for travel, combined with structural undersupply of quality hotel rooms in European cities, created attractive fundamentals for well-positioned hospitality assets.
The centerpiece of 2024's hotel expansion was the AccorInvest consolidation.
Covivio announced completion of the process of consolidating the ownership of jointly owned hotel operating and property companies with AccorInvest. At the end of this operation, initiated at the end of 2023, Covivio holds full ownership of 43 hotels located in France, Belgium and Germany, and sells to AccorInvest 16 hotels in the same regions. The finalized transaction involves the acquisition by Covivio Hotels (and its partners in the 2 joint ventures) of 43 operating companies—thus enabling the regrouping of these hotels, which will be owned by Covivio Hotels—in exchange for the transfer to AccorInvest of the properties of 16 other hotels.
At the end of November, the Group signed the transaction to consolidate the ownership of operating and property companies of hotels held jointly with AccorInvest, for a total exchange value of nearly €800 million.
This transaction represented something more significant than portfolio optimization—it marked Covivio's evolution from pure property owner to hotel operator. In the hotel sector, Covivio has moved in recent years from a property investor approach to that of an asset manager and hotel operator. The Group now supports nearly twenty brands in Europe, with an increasingly diversified model (leased assets or assets in property and operated). The deal with AccorInvest will enable Covivio to strengthen its hotel presence in areas with strong tourist appeal and significant potential for value creation through repositioning and management optimization. Of the 43 hotels involved, 14 will be managed directly by Covivio's hotel management platform, WiZiU. In order to accelerate the planned repositioning plan, Covivio will also rely on 2 other players, Atypio and Sohoma, which will operate 12 and 10 establishments respectively, via management contracts. Five hotels will continue to be operated by Accor.
The creation of WiZiU—Covivio's hotel management platform—signaled the company's intention to capture not just rental income but operating profit from hospitality assets. This vertical integration strategy mirrors moves by other sophisticated real estate owners but carries execution risk: managing hotels requires different skills than owning real estate.
Hotel investment in Europe in 2024 was up by 34%, at €19.5 billion and now represents 9.5% of total real estate investment volumes.
The broader hotel investment market validated Covivio's timing. After years of depressed valuations, hotel real estate attracted increasing capital as investors recognized the asset class's recovery potential.
At the end of December 2024, Covivio Hotels held a portfolio worth €5,818 million (€6,439 million at 100%), characterized by high-quality locations: the average grade given for "location" by customers on Booking.com is 8.9/10; a diversified portfolio, in terms of countries (12 countries), segments (66% of economy and mid-range hotels and 34% of high-end hotels) and partner operators (17 including leaders in Europe such as Accor, Marriott, IHG, NH and B&B). The hotel portfolio has an average yield excluding transfer taxes of 6.4% (+50 bps over one year), of which 6% on the lease portfolio and 7% on the operating properties portfolio.
For investors: The hotel pivot represents a strategic bet on post-pandemic travel normalization and operational capabilities. Higher yields compensate for higher volatility, but execution of the operator model will determine whether Covivio captures the full potential value.
X. 2024-2025: The New Strategic Phase
The strategic plan announced at Covivio's November 2024 Capital Markets Day outlined an ambitious vision for portfolio rebalancing and growth.
Covivio has set itself the target of portfolio rebalancing towards 1/3 exposure to each of its asset classes (hotels, residential, offices), compared with 20% hotels, 30% residential and 50% offices at end-June 2024. More specifically, this will involve continued strengthening of the Group's exposure to hotels, with the aim of increasing the Group's exposure to Southern Europe. In offices, the refocusing on city-centers will continue, with the objective of 80% of the portfolio in city-centers, compared with 69% at end-June 2024.
Recurring net income (adjusted EPRA Earnings) up +10% to €477.4 million (stable per share, at €4.47). Covivio intends to pursue this growth momentum in 2025 and will propose a dividend increase of +6% at the next General Meeting.
Covivio is therefore targeting 2025 recurring net result (adjusted EPRA Earnings) of around €495 million, an increase of around +4%.
The Milan development pipeline represents a particularly significant growth vector. The Symbiosis district and Porta Romana railway yard redevelopment position Covivio at the center of Milan's urban transformation.
Italian developers COIMA SGR and their partners Covivio and Prada Holding released plans for the Olympic Village for the 2026 Winter Games in Milan Cortina. The three companies had purchased the disused Porta Romana railway yard site for €180 million in November 2020.
Covivio will develop new-generation offices in the eastern quadrant (East Gate) of the rail yard area, under the Group's highest international standards, and with the knowledge gained in the hotel and residential sectors which is focusing on hybridized use of spaces. Covivio will develop flexible, sustainable offices in the rail yard area that stimulate increased productivity and maximize cooperation and inclusion.
Parts around the brownfield plot have already been transformed into smart new tertiary and cultural entities, such as Fondazione Prada, a gallery, workshop and studio space, Covivio's Symbiosis community district (which now houses the STEP FuturAbility District), and several new office developments hosting international industrial and fashion brands. The overall vision is one of a mixed-use zone combining residences, offices, social housing, student accommodation and services, connected to the wider metropolitan area via the railway and underground stations.
The 2026 Winter Olympics provide both a deadline and a catalyst for infrastructure development that will benefit Covivio's Milan assets for decades.
The Valesco Group announced the majority controlling investment in Moncler's state-of-the-art global headquarters in Milan, being developed by Covivio SA for delivery in 2025. The price of circa €200 million reflects a net initial yield of 5.5% on stabilized rental income. The landmark transaction underscores Valesco's commitment to investing in mission-critical, best-in-class, ESG-centric assets in Europe's top-performing urban markets. It also demonstrates Covivio's ability to conceive and develop premium office projects that are attractive to both corporates and investors. The 38,000 sqm, six-story property, designed by renowned architects Antonio Citterio & Patricia Viel and developed by Covivio SA, embodies innovation and sustainability. Upon its completion in 2025, it will serve as the global headquarters of Moncler, one of the world's most prestigious luxury fashion brands. Moncler has signed a 15-year inflation-linked lease without breaks.
Access Covivio's financial results at end March-2025: revenue growth of +5.4% year on year. Hotels: launch of tender offers to select the most suitable brands for around 10 hotels in France and Belgium; Offices: occupancy rate up +20bps to 95.7% (vs 95.5% at end-2024); German residential: acceleration of like-for-like rental growth to +4.8% (vs. +4.3% in 2024); Hotels: +4.7% revenue growth on a like-for-like basis and +13% on hotels for which operating properties were acquired at end-2024; High rent visibility thanks to a high occupancy rate (97.3%) and firm lease terms of 6.2 years.
For investors: The 2024-2025 strategy represents a measured approach—rotating toward higher-yielding hotels while maintaining the defensive residential base and upgrading office quality. Success depends on execution of the operator model and continued tourism recovery.
XI. Business Model Deep Dive
Understanding Covivio requires dissecting the mechanics of how a diversified European REIT generates returns across multiple asset classes and geographies.
Revenue Streams
Foncière des Régions derives nearly all of its revenue in the form of rental income from the ownership and maintenance of its portfolio of properties. French offices generate the majority revenue for the company, while Italian office buildings and German residential buildings in Berlin, Hamburg, and Dresden also contribute sizable income streams.
The revenue composition reflects deliberate strategic choices:
Offices (approximately 50% of portfolio): Long-term leases (average 6+ year duration) with corporate tenants provide stable, predictable income. Lease indexation—typically tied to French ILAT or German cost indices—protects against inflation. Reversion potential exists where in-place rents are below market levels.
German Residential (approximately 30%): In Germany, Covivio owns over 40,000 housing units valued at a total of €7.2 billion focusing on the country's busiest cities, including Berlin, Dresden, Hamburg and Leipzig, and the Ruhr region. German rent regulation limits annual increases but provides exceptional stability. Vacancy is near zero in supply-constrained markets.
Hotels (approximately 20%): At the end of December 2024, Covivio Hotels held a portfolio characterized by high-quality locations (average Booking.com location grade of 8.9/10), a diversified portfolio in terms of countries (12 countries), segments (66% economy/mid-range and 34% high-end), and partner operators (17 including Accor, Marriott, IHG, NH and B&B).
The SIIC/REIT Structure
The SIIC regime provides for a full exemption from corporation tax on profits deriving from real estate investments (rents and capital gains), provided that certain distribution obligations are fulfilled (95% of net rents, 60% of capital gains and 100% of dividends received from SIIC subsidiaries).
This structure means: - Tax efficiency flows to shareholders, not the company - Limited retained earnings constrain organic growth - Dividend policy is largely formulaic rather than discretionary - Growth requires external capital (debt or equity) rather than reinvested profits
The Subsidiary Structure
Covivio Hotels operates as a separately listed SIIC, with Covivio as 52.5% shareholder. This structure provides: - Capital markets access for hotel-specific transactions - Clear valuation signal for the hotel portfolio - Flexibility for joint ventures and partnerships - Potential for eventual full consolidation or spin-off
Geographic Diversification
The company has operations across France, Italy, Germany, Spain, Belgium, Luxembourg, the Netherlands, and Portugal. This diversification: - Reduces regulatory and economic cycle concentration - Enables arbitrage between markets at different cycle stages - Increases complexity and management overhead - Requires local expertise in each market
For investors: The SIIC structure makes Covivio essentially a yield vehicle—the mandatory dividend distribution means shareholders receive most of the cash flow. Growth comes from value creation (development, repositioning) rather than retained earnings.
XII. ESG & Sustainability Strategy
Environmental, Social, and Governance factors have become central to Covivio's strategy—both as risk management and as source of competitive advantage.
Covivio is well on track to achieve its target of reducing carbon emissions by 40% between 2010 and 2030, in particular through its €235 million green capex plan by 2030 and its low-carbon policy. At end-June 2024, 96% of the portfolio have environmental certification, close to the target of 100% by end-2025, making Covivio one of the leaders in terms of alignment rate to the EU taxonomy.
98.5% of assets with green certification, including 71.2% of offices certified HQE/BREEAM Very Good or higher; Covivio awarded Fairest Landlord in German residential property for 7th year in a row; L'Atelier, Covivio's European headquarters, honored at SIMI and winner of the ULI Europe Awards.
The ESG strategy manifests through multiple dimensions:
Environmental Certification: The goal to certify 100% of real estate assets as green encompasses not only new projects or total renovations but also existing buildings. Annual analyses measure the quality of the heritage, and 90% of buildings now have green certification.
Carbon Reduction: The -40% emissions reduction target between 2010 and 2030 has been positively recognized by major rating agencies (5-star from GRESB and AAA from MSCI).
Green Finance: Proportion of green debt raised to 50% from 38% at end-2022. In May 2024, Covivio Hotels carried out a €500 million Green Bond issue with a nine-year maturity and a 148-bps margin spread over the mid-swap rate.
Rating Agency Recognition: Covivio holds the following awards and ratings: EPRA BPRs Gold Awards (Financial report and sustainability report), CDP (A-), GRESB (91/100, 5 Stars, 100% public disclosure), ISS-ESG (B), MSCI (AAA), and Sustainalytics (negligible risk).
Jean-Eric Fournier, Director of Sustainable Development, said: "For many years, Covivio has pursued a carbon and climate policy recognized by various bodies (SBTi, CDP, rating agencies, etc.), which helps to protect the value of its assets and the sustainability of its business model. We are delighted to have been awarded an 'A' rating, which recognizes Covivio's ambitions and results."
Social Dimension: In German residential, multiple awards underscore the engagement and customer culture of Covivio: Covivio was recognized for the sixth consecutive time as "Fairest Landlord."
For investors: ESG is increasingly material for real estate valuations. Green-certified buildings command premium rents and higher valuations; assets failing to meet efficiency standards face obsolescence risk. Covivio's early investment in ESG positions it well for regulatory tightening and tenant preferences.
XIII. Playbook: Business & Investing Lessons
Covivio's quarter-century evolution from regional French operator to pan-European platform offers instructive lessons for both corporate strategists and investors.
1. Long CEO Tenure and Vision Continuity
At the head of Covivio since its founding in 2001, Christophe Kullmann is CEO and Member of the Board of Directors.
Twenty-plus years of consistent leadership has enabled multi-year strategy execution that would be impossible with revolving-door management. The patience to pursue value creation through development cycles, to navigate crises without panicking, and to maintain relationships with long-term tenants and partners all flow from leadership stability.
2. Geographic and Asset Class Diversification
The 2008 crisis, COVID-19 pandemic, and 2022 interest rate shock each affected Covivio's business segments differently. German residential stability offset office weakness in 2008; hotel devastation during COVID was partially balanced by residential resilience; office valuation declines in 2022 were partially offset by hotel recovery. This diversification came at the cost of complexity but proved its value in crisis.
3. Quality Over Quantity in Office Real Estate
The consistent pivot toward city-center assets, even when they commanded premium valuations, reflected a conviction that location quality would prove defensive in downturns and enable premium rents in recoveries. The post-COVID "flight to quality" validated this thesis.
4. Anchor Shareholder Benefits
Real estate: Major shareholder in Covivio (≈28%).
Delfin's patient capital enabled Covivio to pursue long-term strategies without pressure for quarterly performance optimization. This anchor ownership represents a form of competitive advantage—many REITs face pressure to maximize short-term distributions at the expense of portfolio quality.
5. Balance Sheet Discipline
The hedging policies that seemed conservative when rates were near zero proved their value when rates normalized. Maintaining 90%+ interest rate hedging, extending debt maturities, and keeping LTV below 45% created resilience that preserved optionality during the 2022-2023 stress period.
6. Active Asset Management Over Buy-and-Hold
Covivio's continuous rotation—selling logistics in 2014, disposing of peripheral offices post-COVID, acquiring hotel operating platforms—demonstrates active portfolio management rather than passive ownership. This approach requires execution capability but generates returns beyond passive rent collection.
XIV. Competitive Landscape & Strategic Analysis
Porter's Five Forces Analysis
Threat of New Entrants: LOW-MODERATE Massive capital requirements create high barriers to meaningful competition. Building a diversified portfolio comparable to Covivio's €23 billion platform would require billions in equity and debt. Regulatory/licensing barriers (SIIC status, local regulations) add complexity. Relationship-based business with long development timelines favors incumbents. However, private equity real estate funds with dry powder pose ongoing competitive threat for individual assets.
Bargaining Power of Suppliers: LOW-MODERATE Construction companies, contractors, and architects have moderate leverage in hot markets where skilled labor becomes scarce. Covivio's scale provides negotiating power with most suppliers. Interest rate environment affects financing costs significantly, though Covivio's investment-grade rating provides access to favorable terms.
Bargaining Power of Buyers (Tenants): MODERATE-HIGH Post-COVID office tenants have increased leverage as remote work provides alternatives. 69% of offices are located in city centers, up from 59% at the end of 2020. The remainder now consists mainly of core assets in major business hubs, 93% let with a 6.1 years firm lease maturity. Quality assets in prime locations retain pricing power; peripheral assets face tenant leverage.
Threat of Substitutes: MODERATE Remote work substitutes for office space; alternative lodging (Airbnb) competes with hotels; home ownership substitutes for rental housing. Covivio's strategy of offering service-enhanced, centrally located properties aims to minimize substitution risk.
Competitive Rivalry: MODERATE Gecina is a French real estate group that owns, manages and develops property holdings worth 20 billion euros by end-June 2020, with nearly 97% located in the Paris Region. Gecina is a French real estate investment trust (SIIC) listed on Euronext Paris. The Group's business is built around the leading office portfolio in France and Europe, alongside residential assets and student residences.
Unibail-Rodamco-Westfield SE is a multinational commercial real estate company headquartered in Paris, France, and is the owner and operator of Westfield shopping centres in the European Union, United Kingdom and the United States. As of 2024, Unibail-Rodamco-Westfield is the largest commercial real estate company in Europe.
Covivio competes with specialized players (Gecina in Paris offices, Vonovia in German residential) and diversified platforms (Unibail-Rodamco-Westfield in retail). The relatively consolidated European REIT market reduces price competition for assets.
Hamilton Helmer's 7 Powers Analysis
Scale Economies: Present but moderate. Portfolio management costs spread over larger asset base, but real estate is inherently local—each market requires specific expertise.
Network Effects: Limited. Unlike technology platforms, real estate ownership doesn't create self-reinforcing networks.
Counter-Positioning: Covivio's diversified model differs from pure-play specialists. Some investors prefer focus; others value diversification. Neither approach is unambiguously superior.
Switching Costs: Moderate for tenants with long-term leases and customized build-outs. Lower for standard space.
Branding: Increasingly important as Covivio evolves from landlord to service provider. The "Welli" flexible office brand and "WiZiU" hotel platform represent brand-building in new categories.
Cornered Resource: Prime locations represent scarce resources that cannot be replicated. Covivio's city-center holdings in Paris, Milan, and Berlin benefit from structural scarcity.
Process Power: At the head of Covivio since its founding in 2001, Christophe Kullmann is CEO and Member of the Board of Directors. Two decades of consistent leadership has embedded institutional knowledge that provides execution advantages.
XV. Key Metrics for Monitoring Covivio
For long-term fundamental investors, three KPIs deserve ongoing attention:
1. Like-for-Like Revenue Growth This metric strips out acquisitions and disposals to reveal the organic performance of the existing portfolio. The Group seized new growth opportunities, particularly in the hotel sector, while finalizing its €1.5 billion disposal plan. Revenue growth of +5.4% year on year; German residential: acceleration of like-for-like rental growth to +4.8% (vs. +4.3% in 2024).
Like-for-like growth captures: - Indexation effectiveness (ability to pass through inflation) - Reversion capture (narrowing gap between in-place and market rents) - Occupancy changes within existing properties - Tenant quality and credit evolution
Target: Consistent positive like-for-like growth above inflation indicates successful active management.
2. Loan-to-Value (LTV) Ratio Lower leverage ratios: LTV of 38.9% (vs. 40.8% at end-2023).
LTV measures balance sheet risk—the proportion of asset values funded by debt. For real estate companies: - LTV above 50% creates refinancing risk in downturns - LTV below 35% may indicate under-optimization of capital structure - The 38-42% range represents conservative positioning with growth capacity
Target: LTV maintained below 42% with stable or improving trend.
3. EPRA NTA (Net Tangible Assets) Per Share Net asset value (EPRA NTA): €79.8/share, up +2.7% over the 2nd half-year.
NTA per share represents the estimated liquidation value of the portfolio after debt repayment. It captures: - Property valuation changes - Share issuance dilution - Net debt changes - Deferred tax liabilities
For REITs trading at discounts to NTA (as most European REITs currently do), this metric indicates the fundamental value that long-term investors can expect to realize.
Target: Growing NTA per share over multi-year periods, with cyclical fluctuations acceptable.
XVI. Risk Factors & Investment Considerations
Interest Rate Sensitivity Despite hedging, Covivio remains fundamentally sensitive to interest rates. Property valuations move inversely with discount rates; refinancing costs eventually reflect market rates; tenant demand correlates with economic conditions affected by monetary policy.
Office Demand Structural Change Post-COVID remote work adoption has permanently altered office demand patterns. While Covivio has pivoted toward quality, the long-term equilibrium demand for office space remains uncertain.
Hotel Operating Risk The expansion into hotel operations through WiZiU introduces operational complexity beyond traditional landlord activities. Hotel EBITDA volatility is substantially higher than rental income variability.
Geographic Concentration Despite pan-European presence, concentration in Paris, Berlin, and Milan creates exposure to regional economic conditions and regulatory changes in these specific markets.
Shareholder Concentration Major shareholder in Covivio (≈28%). The Delfin/Del Vecchio family stake provides anchor stability but creates potential for decisions driven by family considerations rather than optimal corporate strategy.
Regulatory Risk German rent regulation, French commercial lease law, and evolving EU sustainability requirements all pose regulatory risk. Changes to SIIC tax treatment could alter the fundamental economics of the business model.
XVII. Conclusion: Covivio at a Crossroads
Covivio enters late 2025 at an inflection point. The €1.5 billion disposal program has been completed, balance sheet strength has been restored, and hotel exposure has been substantially increased. Covivio has extracted the rental growth potential of its portfolio, via a +13.6% cumulative like-for-like revenue growth since end-2022, enabling recurring net income to rise from €430 million at end-2022 to an expected €460 million by end-2024.
The strategic vision is clear: Portfolio rebalancing towards 1/3 exposure to each of its asset classes (hotels, residential, offices), compared with 20% hotels, 30% residential and 50% offices at end-June 2024.
The execution challenges are equally clear: operating hotels is fundamentally different from owning buildings; ESG compliance requires ongoing capital expenditure; competition for prime assets remains intense; and the macroeconomic environment—while improving—remains uncertain.
Over the last few years, and in particular in 2024, Covivio has extensively transformed its portfolio by reinforcing its centrality and quality, but also by adding a strong operated real estate dimension, a source of additional income and value creation. At the same time, after two years focused on financial discipline, the Group's balance sheet has been strengthened. Covivio has thus emerged stronger from the real estate crisis, as the investment market is starting to recover and the rental market is well oriented, for central offices as well as hotels and residential properties. Covivio intends to continue its growth momentum in 2025, with priorities of continuing to rebalance its portfolio between its three asset classes, extracting growth potential from existing assets, and deploying its integrated real estate operated offer across all asset classes.
For a company that traces its origins to the restructuring of France's industrial northeast, Covivio's evolution into a pan-European operator of living spaces—offices, homes, and hotels where people work, live, and travel—represents a remarkable arc. Ruggieri's motor and passion was "developing companies, imagining a strategy, animating teams, promoting young talents, and maintaining development in a structured and sustainable movement." "I am not a man of short term, I like to build brick by brick," he said. The goal of Batipart: invest in companies, develop them to become leaders in their market. What he succeeded with Foncière des Régions.
That brick-by-brick approach, continued under Kullmann's quarter-century leadership and supported by the patient capital of the Del Vecchio family, has built something substantial. Whether the next chapter—with its operational complexity, competitive intensity, and macroeconomic uncertainty—can match that record remains the central question for investors evaluating Covivio today.
MYTH VS. REALITY BOX
| Common Narrative | Reality Check |
|---|---|
| "European office REITs are dead" | Covivio's city-center offices maintain 95%+ occupancy; the challenge is peripheral, not prime |
| "Rising rates killed real estate" | Covivio's 92% hedge ratio limited impact; 2024 recurring earnings grew 10% |
| "Hotels are too volatile for REITs" | Long-term leases and diversified operators provide stability; post-COVID recovery exceeded expectations |
| "German rent control eliminates growth" | Like-for-like growth of 4.8% in 2024; regulated rents still below market create reversion potential |
| "REIT management extracts value" | 24-year CEO tenure with aligned interests; Delfin anchor reduces short-termism |
Spotify
Apple Podcasts
Amazon Music
Audible
YouTube
Castbox
Pocket Casts