Société de la Tour Eiffel's 2022 annual results and first progress report on the new roadmap

The Board of Directors of Société de la Tour Eiffel, meeting on March 09, 2023, approved the annual and consolidated financial statements closed on December 31, 2022. The audit procedures on these accounts have been carried out and the corresponding reports are in progress. resignation.

For Christel Zordan, Managing Director of the Société de la Tour Eiffel: “Resolutely turned towards the future, the property company began the first stages of its transformation in 2022 with, on the one hand, the adoption of a roadmap at the very beginning of the year and, on the other hand, the implementation of an internal organization adapted to its new objectives, with in particular the strengthening of its investment and development teams and the creation of a CSR department. These adaptations, carried out during the financial year, enabled the start of the new asset rotation plan in the second half of the year and the resumption of future development operations. However, and despite significant signatures, the property company still faces major rental challenges to consolidate its cash flows and restore its distributive capacity, given in particular certain major vacancies in Ile de France and the vacancy caused with a view to its redevelopments. This is why the transformation of the portfolio, favoring asset classes and locations adapted to the new economic and societal challenges, is accompanied by a necessary transition phase before allowing shareholders to benefit from this new model. In view of the important steps already started and despite market conditions impacted by high inflation, a rise in interest rates and an uncertain geopolitical environment, I am confident in the property company's ability to continue to effectively implement its roadmap. over 5 years as announced in March 2022.”

Well-established fundamentals...

99% of rents collected in 2022
€13,8 million in leases signed, including €7,7 million in new leases
A value of the portfolio on a like-for-like basis down slightly by 1,8% to €1,79 billion
€30 million in disposals carried out in the service of the transformation of the portfolio
€34 million of acquisitions and developments in assets benefiting from solid fundamentals
LTV still cautious at 38,1%
€180 million in drawdown capacity on RCF lines
Continuing EPRA NAV (NTA) per share: €49,1
EPRA liquidation NAV (NDV) per share: €51,9
EPRA topped-up rate of return: 4,2%

… at the service of the transformation of its model to reconnect with sustainable growth

EPRA occupancy rate: 78,1% (vs. 75,6%)
Consolidated net income: €4,0m (vs. €2,8m)
EPRA earnings per share: €1,9 (vs. €1,6)
Current cash flow per share: €1,8 (vs. €1,7)

Creation of a specialized ESG committee

Aware that the value of its assets depends in particular on its environmental performance and wishing to continue to adhere to the highest standards of CSR commitment, Société de la Tour Eiffel is continuing its actions, undertaken more than 10 years, in favor of more responsible real estate vis-à-vis the environment and energy sobriety. As an extension of this CSR approach, the Board of Directors completed its governance system with the creation last April of an Environmental, Social and Governance (ESG) Committee. This specialized committee is made up of 4 members: SMA SA (represented by Fabienne Tiercelin), Jacques Chanut, Imperio Assurances et Capitalization (represented by Marie-George Dubost) and Christine Sonnier, independent director, who chairs it.

Start of the new roadmap

To support rapid societal changes, the Société de la Tour Eiffel announced in March 2022 a new roadmap aimed at adapting its assets. This adaptation is moving towards new asset classes with more mixed uses within its portfolio (mixed urban operations, retail-type assets, managed residential, offices, logistics), but also towards greater presence in the regions .

This evolution of the Company is based on several levers which constitute the arbitration of buildings which have become unsuited to the new challenges of the Group, the endogenous developments identified and to come, the improvement of the environmental performance of the buildings and investments in assets in adequacy sustainable with their markets.

Arbitration of buildings unsuited to the Group's challenges

Despite the sharp slowdown observed on the investment market in general, the Group was able to complete the sale of 4 assets in 2022 for an amount of €30 million, at prices in line with the latest appraisal values. The rotation of the portfolio to meet the challenges of the roadmap will continue in 2023.

Endogenous developments identified and to come

As announced, the Group is taking advantage of the freeing up of the EvasYon sites in Lyon (Lyon Dauphiné) and Plein'R in Puteaux (previously Olympe) to redevelop them. This is how in Lyon, a building permit for the development of a mixed project comprising a 5.000 m² office building and a 5 m² coliving building was filed and then obtained (purged of any appeal) at the beginning of 500. The co-living building is secured by signing a 2022-year BEFA with a specialized operator. In Puteaux, on the quays of the Seine, on the immediate outskirts of La Défense, the group obtained approval and filed a building permit for the construction of a 12 m² office building.

Regarding the Aubervilliers site, released in 2021, a major redevelopment operation is under study, in line with the objective of mixed uses expressed in the roadmap. In the meantime, the site hosts for a temporary occupation of 2 years, Poush, the first incubator of artists in France, and becomes an innovative, creative and cultural place at the service of the influence of Aubervilliers and Greater Paris.

On the Parc du Golf in Aix-en-Provence, a building permit has been obtained and cleared for the construction of an office building with a surface area of 3.900 m² currently being marketed.

In the Eiffel Nanterre Seine park, on available land, the Company filed and obtained a building permit for the development of a 5.400 m² urban logistics building for which work has started. Finally, in Bobigny, the Group acquired land at the end of 2021, adjoining that already owned by the property company, allowing the redevelopment of all of this land with an urban logistics project. A permit has been filed and obtained for an area of 7.580 m².

These six projects, representative of the property company's value creation strategy, feed into the development plan as administrative authorizations are obtained. In total, for the four projects under redevelopment, €5,8 million in potential rents are included in the vacancy caused.

Investments in assets in phase with their market

In the second half, the Group made two acquisitions. The first, a 990 m² office building located in Paris CBD, is fully leased to a world leader in digitalization in the construction sector for a period of 9 years, 6 of which are firm. The second, a mixed and reversible office/residential property complex of 3.900 m² off-plan in Lyon, is located very close to the Part-Dieu station. This program, called Manufacture, will offer, when delivered in early 2025, 2.000 m² of offices, 1.300 m² of housing and 600 m² of shops.

At the same time, three investment projects have given rise to the signing of promises: a pre-let VEFA of 4.400 m² in Issy les Moulineaux (delivery mid-2025) and two leased and restructured assets in Paris 9th of 1.320 m² and Paris 12th of 2.750 m² for actual acquisitions scheduled for early 2023. These investments are also part of the heritage transformation strategy: quality locations, secure rental income and environmentally efficient buildings.

A heritage in the process of transformation…

As of December 31, 2022, the value of the portfolio amounted to €1.787 million, for 80% offices (€1.430 million), 10% business/logistics premises (€183 million), 8% mixed use (147 M€) and still marginally in managed residential. This portfolio is located entirely in France, 75% of which is in Greater Paris (€1.346 million). In a process of permanent improvement of the quality of the heritage, 79% of it is the subject of a certification attesting to its environmental performance.

…with strong rental challenges…

€13,8 million in annualized rents were agreed during the period, including €7,7 million in new leases signed and €6,1 million renewed. Marked by the signature with Nokia (11.700 m²) in Massy at the start of 2022, the renegotiation with CS Group (12.200 m²) in Plessis Robinson and the leave of Orange in Bagneux (7.880 m²) and France Télévision in Saint-Cloud (4.100 m² ), the net balance of the rental activity amounts to -€0,4 million in annualized rents.

During the year, more than 89.400 m² were signed. Apart from the previously mentioned transactions, the Company renewed 2.170 m² in Bordeaux with EY, signed for 1.820 m² with Polyexpert Rhône Alpes on the K-Bis in Vaulx-en-Velin and for 620 m² with M2DG in Paris Auber. In addition, the Center des Monuments Nationaux and Pôle Emploi are renewing or extending their commitment to 3.960 m² and 5.230 m² respectively in Paris Domino.

As of December 31, 2022, the financial occupancy rate (EPRA) stood at 78,1% (vs. 75,6% at the end of 2021) and the average duration of the leases and their firm period were respectively 5,6 years and 3,0 years (compared to 5,5 and 3,0 years at the end of 2021). Adjusted for vacancy caused (redevelopment operations), this occupancy rate comes out at 84,1% (vs. 81,5%).

…and productive on its occupied part: 99% of 2022 rents collected

As of the date of this press release, out of a total of €76,2 million in rents paid in 2022, 99,0% have already been collected.

This performance is the result of the internalized property and rental management model combining rigorous selection and proximity of tenants to build a quality rental base.

The monitoring of rental risk based on Coface and Credit Safe ratings continues to indicate that more than 80% of the rental base is made up of tenants belonging to the two best categories (low or very low risk), testifying to its resilience.

EPRA earnings at €1,9 per share driven by a termination indemnity

On a like-for-like basis and excluding induced vacancies, gross rental income increased by 3,1%, driven up by the early termination indemnity received at the Bagneux site (-3,3% restated for this item). Overall, rents were stable at €84,5 million, due to disposals and the resulting vacancy. Rental income net of charges increased by 0,9%, in line with the change in the occupancy rate.

Current operating income came to €53,6 million (vs. €51,4 million). This variation is mainly the result of a technical effect, 2021 having been impacted by the depreciation (-€2,8 million) of the income expected from the Vaugirard operation which was recorded in 2022 in other operating income (+2,1. €1,2 million). In addition, operating costs increased by €XNUMX million in connection with the adaptations made to the Group's structure and the reduction in management fees for lessee works.

Financial expenses amounted to €13,9 million (vs. €15,5 million), reflecting the favorable effect of interest rate hedging and early loan repayments. The average rate is maintained at 1,7%. This stability is made possible by the hedging strategy carried out on the variable-rate debt in place and which, as it stands, will bear fruit until December 2024.

After taking into account other income and expenses, taxes and results of companies accounted for using the equity method, EPRA earnings (current net income) amount to €42,0 million, or €1,87 per share (after taking into account the cost of TSDI in the EPRA earnings per share), or €1,56 restating the impact of the compensation for Bagneux.

By reintegrating all EPRA restatement adjustments (allowances, reversals, income from disposals, changes in the value of financial instruments), the consolidated net income amounts to +€4,0m compared to +€2,8m in 2021 .

Current Cash Flow stood at €30,3 million for the period, i.e. €1,83 per share (including €0,31 related to the Bagneux indemnity), compared to €1,66 in 2021.

Net Asset Value down slightly

The Continuing EPRA Net Asset Value (NTA) per share changed from €50,9 to €49,1 at the end of 2022, mainly due to the distribution of the dividend and the adjustment of the value of the Portfolio. The EPRA Liquidation Net Asset Value (NDV) per share benefits from the revaluation of fixed-rate financial instruments (due to the sharp rise in rates at the end of the year) limiting the decline, going from €53,0 to €51,9.

Dividend of €0,75 per share

Given the macroeconomic uncertainties and portfolio challenges, the Board of Directors will propose a dividend of €0,75 to the General Meeting of Shareholders.

The Société de la Tour Eiffel committed to transforming its heritage

At the end of a first year devoted to defining and adopting a new roadmap and adapting its structure to meet its objectives, the Group is resolutely committed, as it has announced in early 2022, towards the transformation of its assets. This translates into the identification of asset disposal opportunities that no longer meet new expectations, the reconstitution of a pipeline of development projects, a very active return to the investment market and a search for improvement. permanent environmental quality of the heritage.

These combined initiatives will make it possible, in 5 years, to reconstitute cash flows by improving the occupancy rate and the margin rate and will translate into greater distributive capacity and the return to sustainable growth.