The Board of Directors of Société de la Tour Eiffel, which met on 23 July 2020, approved the financial statements at 30 June 2020. The limited review procedures for these accounts have been completed and the corresponding reports are being issued.

Thomas Georgeon, Managing Director of Société de la Tour Eiffel, stated: “The first half of 2020 was to be the subject of the announcement of a new strategic plan. The news of the global pandemic and the outlooks further to the economic crisis have decided otherwise. However, the first half of 2020 has been highly positive with intense operational activity despite the lock-down, with rental successes, continuation of the development plan, and significant fund-raising among our main shareholders. Faced with the uncertainties of the period, Société de la Tour Eiffel is resolutely pursuing its growth path while preparing for the challenges that are sure to lie ahead. The satisfaction of tenants and the construction of long-lasting and quality cash flows, both of which are priorities for the property company, are the key factors for its success."

Strategy

• Property portfolio increasing to €1.86bn based on the 100/80/20 refocus: 100% office property, 80% in Greater Paris / 20% in high-potential regional cities
• Improvement of the financial structure: Perpetual subordinated bonds for €180m and return of the LTV ratio in the strategic objective to 39.0% (vs. 49.0% at 31 December 2019)
• Adaptation to the Covid-19 crisis
  • 2020 dividend maintained, but reduced to €2.0 per share (vs. €2.25 announced in March 2020);
  • Continuation of business during the lock-down period and return to the office as of the beginning of June 2020;
  • Support for tenants: Lock-down rent spread evenly over the second half without any penalties for SMEs / VSEs.
• CSR performance a central feature of our property portfolio

Outlook

• €96m of investment pipeline including €7m of projects delivered in 1H 2020
• €189m of disposals: more than 50% of non-strategic assets sold or under sale agreements

Financial Components

• Valuation of the property portfolio: +0.6% to €1.87bn (+ 1.3% on a like-for-like basis)
• EPRA earnings per share: €1.3 / Current cash flow per share: €1.6
• Consolidated net profit: €13.4m (vs. -€2.4m)
• NNNAV EPRA per share: €54.4 (+ 0.3%)
• Net Initial Yield EPRA topped-up: 4.52%

France's 5^th largest listed property company in office property with assets of €1.87bn as at 30 June 2020, the Société de la Tour Eiffel Group has based its development strategy on tenant satisfaction, by meeting their requirements and anticipating those of tomorrow. The Group's internalized management model, its unanimously recognized proximity to customers, its precise vision of tenant expectations and its strong CSR commitment make it a benchmark real estate player and an expert in office property in Greater Paris.

A clear 100/80/20 strategy:

Société de la Tour Eiffel is pursuing the strategic refocusing of its property portfolio aiming for a portfolio consisting exclusively of offices, 80% of which are located in Greater Paris and 20% in high-potential regional cities (Aix-Marseille, Bordeaux, Lille, Lyon, Nantes, Toulouse). The three main levers for its growth are its developments, the acquisitions of individual or portfolio buildings and external growth.

At 30 June 2019, the Group's property portfolio amounted to €1,871m, with 89% offices (€1,671m), 4% mixed office / retail assets (€68m) and 7% non-strategic assets (€132m). 74% of the assets are located in Greater Paris (€1,390m) and 19% in high-potential regional cities (€349m).

A half-year marked by adaptation to the COVID-19 crisis

The Coronavirus (Covid-19) epidemic, declared by the World Health Organization to be a “global pandemic”, has had an impact on every sector of activity including real estate.

With the Covid-19 epidemic for its backdrop, the Group first of all sought to ensure the safety and health of its employees, that of its tenant companies and their employees, and of its service providers and suppliers. The measures put in place were mainly designed to ensure the proper operation and safety of the buildings, ordering the shutdown of construction sites and continuing the Company's business by having all of its employees switch to teleworking.

In order to support the tenants most exposed to the consequences of the crisis, their rents for the 2^nd quarter were spread evenly over the second half of 2020 without any penalties. That support concerned 13% of rents.

The construction sites were all shut down during the lock-down and resumed in very good conditions from mid-May onwards. The interruption in the construction sites should result in a delay of around one quarter in the delivery schedules initially planned.

In view of the wait-and-see attitude observed among many investors, the Group decided to postpone the second part of the €189m disposal plan initially envisaged for 2020, based on the insignificant amount of this residual property portfolio and the lack of any major time constraint to finalize the disposals. During the first half of the year, the logistics portfolio under sale agreements at 31 December 2019 was sold for €35m.

In the end, at 30 June 2020, Société de la Tour Eiffel recorded no significant negative impact at the stage linked to the Covid-19 crisis and continued to implement its growth plan.

€96m of developments in 2020

After taking into account the completion of the Olivier project in Marseille at the start of the year as well as progress in current developments, the balance of the plan amounts to €92m as at 30 June 2020. Advanced to the tune of €60m and expected to generate €5.7m in annualized rental income, it consists of 2 development schemes in Greater Paris (55%) and 3 schemes in high-potential regional cities (45%).

Among the development schemes in progress:

• signing of an off-plan lease agreement (BEFA) on the Saclay plateau in Orsay with IBM for 5,400 sq. m. With the floor space also leased by the Paris-Saclay metropolitan authority, and completion scheduled for autumn 2020, the property transaction has been fully leased.

• transformation of the mixed-use site (shops and offices) in Bordeaux with the transformation of a portion of the parking lot into a business centre with nearly 3,000 sq. m of floor space, after the signing of an off-plan lease agreement (BEFA) (completion re-scheduled for the beginning of 2021).

Sustained rental activity despite a deteriorated environment

€7.6m in annualized headline rents were agreed during the period, including €2.2m in new leases signed and €5.3m in renewed, for a net gain of +€0.9m.

During the lock-down, the Group announced in particular that it had signed for nearly 4,500 sq. m of floor space on its Nanterre Seine Eiffel business park and 1,400 sq. m of floor space on the Olivier (Aygalades Eiffel business park in Marseille) shortly after delivery.

In addition, as announced, the Group will take advantage of the releases in the second half of 2020 of the Lyon Dauphiné, Puteaux Dion Bouton and Aubervilliers Jean-Jaurès sites to launch value-creating developments over and above current flows (€4.4m in annualized rental income).

As at 30 June 2020, the financial occupancy rate (EPRA) was 82.9% (vs. 82.1% at the end of 2019) and the average firm lease term was 3.0 years.

EPRA earnings (Recurring Net Earnings) were up at €5.8 to stand at €1.3 per share

On a like-for-like basis, rental income fell by -0.7%. and increased by + 3.8% corrected for the departure of Capgemini on 30 June 2019 on the Suresnes site. Overall, it stood at €47.0m, down -6.2% mainly due to disposals.

Current EBITDA came to €30.8m, almost stable (-0.8%), the sharp reduction in corporate expenses, fuelled by cost synergies for €2.5m, making it possible to offset this drop in income.

Financial expenses stood at €8.8m (vs. €9.0m), reflecting additional drawdowns to finance developments and Capex (€35.9m) and an improved financing cost. The average debt interest rate stands at 1.8% (vs. 2.0% in H1 2019), demonstrating the performance of the €330m re-financing carried out last October.

The success of the issuance of new perpetual subordinated bonds for €180m last June, to which the main shareholders of the group contributed, has allowed Société de la Tour Eiffel to significantly enhance its equity capital. The instrument comes with a coupon of 4.5% with a first possibility of repayment in 5 years. This fund-raising made it possible to restore the LTV ratio to 39.0% (vs. 49.0% at year-end 2019) and thus return less than 18 months after the merger with Affine to the strategic objective of 40%.

After taking into account other income and expenses, taxes and earnings of companies accounted for using the equity method, the EPRA result (recurring net profit) stood at €23.0m, or €1.30 per share, an increase of 5.8%.

By reintegrating all EPRA restatement adjustments (depreciation, net profit on disposals, and changes in the value of financial instruments), consolidated net income rose from a loss of €2.4m in 1H 2019 to a profit of €13.4m for the same period in 2020.

Current Cash Flow amounted to €25.7m or €1.55 per share compared with €1.70 for 1H 2019.

Net Asset Value stable

The EPRA NNNAV per share rose from €54.2 to €54.4 at the end of June 2020, the dividend paid in June having been more than offset by the EPRA earnings and the increase in the fair value of the portfolio over the period.

Taking into account the net impact of investments and disposals, assets amounted to €1,870.8m (excluding transfer taxes and fees), compared with €1,860.1m at year-end 2019 (+1.3%).

Greater margin for manoeuvre to better face new challenges

Following on from the initiatives taken to support vulnerable tenants and the economy more generally against a backdrop of a global health crisis, Société de la Tour Eiffel has responded to the call of the French public authorities by reducing the dividend to €2.0 per share (vs. €2.25 initially proposed). The amount thus retained, i.e. €4.1m, expands the margin for manoeuvre in supporting tenants as well as possible.

At the end of June 2020, tenants identified as at “high” and “very high” risk given their exposure to the consequences of the Covid-19 crisis, represented €3.8m in rent on an annual basis even though at this stage no significant payment incident was observed on rent calls for the 2^nd or 3^rd quarters.

At the same time, as it has undertaken to do, Société de la Tour Eiffel enhanced its equity in June by issuing €180m in perpetual subordinated bonds to its main shareholders.

In addition to securing the financing of its development plan, the issue gives the property company a greater margin for manoeuvre, providing it with additional resilience faced with the various challenges of the new environment, including the capacity of tenants to meet their payment schedules, delays in completions, and even possible decreases in property values. The fund-raising should also enable the Group to seize new investment opportunities.

With regard to rigorous management, the Group can move forward resolutely towards its objectives: refocusing the portfolio on its strategic locations, improving the quality of assets and income and generating significant capacity for growth.

Calendar

• February-March 2021: 2020 annual results (after market)
• April 2021: General Shareholders' Meeting

The presentation of the results will be available on the Group's website as at 29 of July: www.societetoureiffel.com.

Contacts