Société de la Tour Eiffel
Half-year results 2019
A change in scale
The Board of Directors of Société de la Tour Eiffel, which met on 24 July 2019, approved the financial statements at 30 June 2019. The audit procedures on these financial statements have been carried out and the Statutory Auditors' report on the half-year financial information has been issued.
Thomas Georgeon, Managing Director of Société de la Tour Eiffel, said: "With a property portfolio valued at €1.8bn following the merger-absorption with Affine, the Société de la Tour Eiffel Group has changed scope and is strengthening its fundamentals in order to regain the capacity necessary for its growth. Focusing on a medium-term objective of 100% office property and a geographic distribution of 80% in Greater Paris and 20% in Regions with potential, we keep on carrying out our strategy: greater proximity with our tenants, development and redevelopment of our investment property portfolio and land reserves, opportunities for targeted acquisitions of secured assets. In addition, we are making good progress in implementing our disposal plan for non-core assets and are focusing our energy on increasing investment property portfolio occupancy.
- 100% office property, 80% in Greater Paris / 20% in Regions with potential
- Monitoring of the LTV (loan-to-value) ratio
- CSR performance a central feature of our property portfolio
Key Financial Indicators
- Valuation of the property portfolio: +5.0% to €1.8bn (+ 1.6% like-for-like)
- EPRA earnings per share: €1.23 / Current cash flow per share: €1.70
- Consolidated net profit: €2.4m (vs. a loss of €2.9m in H1 2018)
- EPRA NNNAV per share: €51.6
- Net Initial Yield EPRA topped-up: 5.11%
- 2018 dividend paid in 2019: €3 per share, 67% subscribed in shares
Achievements and Outlooks
- €172m Development pipeline: €34m in projects completed during the semester
- €189m in disposals: progress on the disposal plan for non-strategic assets in line with the announced timetable
- Signature in mid-July of an acquisition agreement related to a 4,800m² office building and a 72,390m² land plot located on the Aix-en-Provence business park
- Renewal of key leases with SNCF and La Poste (€6.5m in rental income)
- Reletting of one-third of the vacant space (5,500m²) of the Seine-Etoile building in Suresnes after being vacated by Capgemini
- €4.4m in synergies expected one year ahead of schedule
- Outlooks marked by the notices of leaving in 2018 from two major tenants (impact on rent equivalent to a loss of €10m)
- Cash flow 2019: impacted by these notices of leaving but partially offset by synergies obtained faster than expected
5th-ranking listed office player in France with €1.8bn in assets as at 30 June 2019, Société de la Tour Eiffel strategy is committed to tenant centricity. Its internalized management model, its recognized proximity to customers, its vision of end-user expectations and its strong CSR commitment make it a benchmark real estate player.
A clear strategy: 100% office property, 80% in Greater Paris / 20% in Regions with potential
Société de la Tour Eiffel is pursuing the refocusing and development of its investment property portfolio and is aiming for the medium-term objective of a portfolio consisting exclusively of offices, 80% of which will be located in Greater Paris and 20% in Regions with potential (Aix-Marseille, Bordeaux, Lille, Lyon, Nantes, Toulouse). The main levers for its implementation will be the successful fulfilment of both the growth plan (a €172m development pipeline and a €23m of secured acquisitions) and the disposal plan for non-strategic assets.
At 30 June 2019, the Group's investment property portfolio amounted to €1,804m, with 86% offices (€1,549m), 4% mixed office / retail assets (€65m) and 10% non-strategic assets (€189m). 72% of the assets are located in Greater Paris (€1,298m) and 18% in Regions with potential (€316m).
Investments: completion of two acquisitions for €23m
In the first half, the Group continued its development momentum with:
- the acquisition of a set of 4 office buildings (+€1.4 m in annual rent) totalling an additional 10,000 m², strengthening specifically the presence in the Nanterre Seine business park;
- the acquisition of a building with 1,160m² of additional floor space in the Marseille business park (+€0.1m in annual rent).
Pipeline: €172m of developments in 2019 to feed the growth of future revenues
After taking into account the completion of 6 projects during the half-year (€34m in value representing a potential annual rental income of €2.7m), current developments amounted to €138m as at 30 June 2019. Advanced to the tune of €71m and expected to generate €12.6m in annual rent, they are divided into 4 projects in Greater Paris (62%) and 6 projects in Regions with potential (38%).
Completion outcomes over the first-half are highly positive:
- the Kibori building (4,000m²) in Nantes, which was fully let upon completion (press release of 14/05/2019);
- the Indigo building (1,000m²), located in the Aix-en-Provence business park, completely renovated and fully leased to Daikin (press release of 23/05/2019);
- the Grand Navarque site (5,850m²) on the Nanterre Seine business park, multi-tenant, fully redeveloped, with an occupancy rate of 96% on completion.
Among the projects in progress:
- signing of an off-plan lease agreement (BEFA) on the Saclay plateau in Orsay with IBM for 5,400m² (press release of 30/04/2019). With the floor space also taken by the Paris-Saclay metropolitan authority, and completion scheduled for summer 2020, the property has been fully pre-leased.
- new transformation of the mixed site (shops and offices) in Bordeaux with the transformation of a portion of the parking lot into a co-working space on nearly 3,000m², after the signing of an off-plan lease agreement (BEFA) (completion scheduled for year-end 2020).
€189m disposal plan for non-strategic assets under way
For the past four months, the Group has being pursuing its strategy of refocusing with the launch of half of its disposal plan in the sales process (€189m). This plan mainly concerns offices located outside the Group's strategic locations, and involves logistics and retail assets.
In order to address this top priority objective, the Group has set up a team dedicated to disposals. 50% of the assets come from Ex-Affine's portfolio and 50% from Société de la Tour Eiffel's portfolio and produce an annual rent of €16.7m.
The first half was marked by two departures (already announced mid 2018) and two renewals
After the departure of Alstom at the end of November 2018 from the Massy site (3.1% of rental income) and of Capgemini at the beginning of July 2019 from Suresnes (3.5% of rental income), the Group:
- renewed the lease for a fixed term of six years with SNCF on the Paris Traversière site (2.7% of rental income);
- renewed leases for fixed terms of six years with La Poste for several parcel service platforms (3.4% of rental income).
During the period, the financial occupancy rate (EPRA) declined slightly to stand at 84.7% at the end of June 2019 (vs. 85.2% at year-end 2018) and 89.5% after restating the strategic vacancy.
The Group's rental income increased by 43.4% to €49.0m after the integration of Affine. On a pro forma basis and like-for-like, rental income decreased by 7.2%, mainly due to the departure of Alstom at the end of November 2018 from the Massy site.
Current EBITDA stands at €31.0m (+32.1%), given the non-recurring €3.3m costs related to the completion of the merger. The impact of cost synergies is expected to show in the second half of the year.
At €9.0m, the financial expenses reflect the impact of the higher financial leverage of ex-Affine business model, although with a lower average financing cost. As a result, the average cost of debt stands at 2.01% against 2.21% for the 2018 fiscal period. In addition, as the Group continues its development program, the LTV ratio stands at 49.7% (vs. 48.9% at year-end 2018). As part of the merger, the Group is reviewing its overall financial structure with a view to rationalizing its debt and operating organization.
After taking into account other income and expenses, taxes and income from companies accounted for using the equity method (whose changes and amounts remain marginal at the group level), EPRA earnings (recurring net income) amount to €21.0m, i.e. €1.23 per share (vs. €1.48 in H1 2018).
Lastly, by reintegrating all EPRA adjustments (allocations, profit on disposals, and changes in the value of financial instruments), consolidated net income rose from a loss of €2.9m in H1 2018 to a profit of €2.4m in H1 2019.
Current cash flow stands at €26.9m compared with €23.4m in H1 2018, the difference with EPRA earnings being mainly due to the payment of annual interests in mid-July for the two bond issues. Per share, it stands at €1.70 (vs. €1.91 as at H1 2018).
Resilient Net Asset Value
At the end of June 2019, the fair value of the Group's investment properties amounted to €1,803.6m (excluding transfer taxes and fees), compared with €1,717.2m at the end of 2018 (+5.0%) for a like-for-like revaluation of 1.6%, mainly due to a better asset appreciation and some increases in rental values.
Despite the full impact of the dividend payout of €3.0 per share in the first half of the year, the EPRA Triple Net Asset Value (adjusted for the value of the subordinated perpetual notes (TSDIs) based on an indicative valuation of the issuing bank) per share stands at €51.6 (compared with €53.0 at year-end 2018).
The synergies generated by the integration of Affine should bear fruit faster than expected (+€4.4m as of 2019), thanks to the efforts of all our employees. In addition, recorded the following post closing events:
- the signing of an acquisition agreement related to a 4,800m² office building and a 72,390m² land plot located on the Aix-en-Provence business park;
- the reletting of 5,500m² out of the 15,000m² vacated in the Seine Etoile building in Suresnes.
The ramp-up of the pipeline (€172m / rent: €15.3m / completion of 60%) and the disposal plan (€189m / rent: €16.7m) will enable the Group to strengthen its fundamentals and come closer to its objectives: to refocus the investment property portfolio on its strategic locations, improve the overall portfolio quality as well as that of its revenues, and generate greater capacity for growth.
- February-March 2020 : 2019 Financial results (after Market)
- May 2020 : General Shareholders Meeting
The result presentation is available on the company's website : www.societetoureiffel.com.
Relations Presse : Laetitia Baudon – Directrice Conseil Agence Shan : Tél : + 33 (0)1 44 50 58 79 / firstname.lastname@example.org
Relations Investisseurs : Florent Alba – Directeur Conseil - Agence Shan : Tél : + 33 (0)1 44 50 51 71 email@example.com
A propos de la Société de la Tour Eiffel
Société d'Investissements Immobiliers Cotée (SIIC) sur Euronext Paris, sa stratégie privilégie l'investissement sur des sites à fort potentiel et la fourniture d'immeubles neufs loués à des acteurs de premier plan. Son patrimoine de près de 800.000 m² s'élève au 30 juin 2019 à 1 804 millions d'euros pour des actifs situés principalement en région parisienne.
Société de la Tour Eiffel est cotée sur Euronext Paris (compartiment B) – Code ISIN : FR0000036816 – Reuters : TEIF.PA – Bloomberg : EIFF.FP – Membre des indices IEIF Foncières, IEIF Immobilier France