Tour Eiffel (Société de la) — Interim / Quarterly Report 2016

Jul 22, 2016

2016 Half-Year Results Fundamentals strengthened - Development Plan Fulfilled

The Board of Directors, which met on 22 July 2016 under the chairmanship of Hubert Rodarie, approved the financial statements as at 30 June 2016. The limited review procedures for these accounts have been completed, and the corresponding reports are being issued.

Consolidated figures (audited)

	30/06/2016	31/12/2015
Portfolio value exluding transfer duties	€ 977.4m	€ 915.3m
Portfolio value at amortised cost	€ 797.1m	€ 751.6m
Net financial debt	€ 408.2 m	€ 343.8m
Financial debt rate	1.9%	3.2%
Net LTV	41.8%	37.6%
EPRA NNAV (in €/share)	57.4	58.1
	H1 2016	H1 2015
Rental income	€ 28.9m	€ 26.1m
EPRA financial occupancy rate	90.9%	89.2%
Net profit/loss	€ 5.7m	€ 7m
Net recurring profit/loss	€ 7.3m	€ 5.0m
EPRA earnings	€ 15.8m	€ 13.6m
Cash-flow	€ 20.8m	€ 13.6m
in €/share	2.2	1.4

Operating indicators improving

Consolidated turnover (comprising rental and service charge income from investment properties) rose from €32.3 million for H1 2015 to €36.6 million for H1 2016, of which rents alone accounted for €26.1 million and €28.9 million respectively.

Rent increases resulted primarily from acquisitions in 2015 and 2016 (5 properties in Guyancourt, Vélizy and Puteaux).

Operating income on ordinary activities stood at € 10.8 million for H1 2016 after taking into account depreciation, property expenses and overheads.

Current cash flow rose sharply to € 20.8 million against € 13.6 million for H1 2015.

An active investment plan in secure real estate

The first half of 2016 for the Société de la Tour Eiffel Group was marked by the acquisition of two new properties:

• − Olympe, an office property with 4,000 sq. m of floor space located Quai de Dion Bouton in Puteaux, occupied 100% by a single tenant;
• − Odyssée, an office property with 12,000 sq. m located in Guyancourt (78) 100% occupied by two tenants.

These acquisitions are fully in line with the Group's strategic road map to bring the value of its property portfolio to € 1.5 billion in the next 2-3 years.

Development projects on all land reserves

The Group is continuing to study the development of its land reserves in the Paris region and in the provinces, by preparing construction projects adapted to rental demand:

• − The Parc d'Orsay: in the Orsay Parc Eiffel, an immediate construction project of 10 000 to 17,500 sq. m of offices, the first phase of which consists of three buildings (7,000 sq. m of offices, 4,000 sq. m of offices and 2 000 sq. m of commercial facilities). The building permit is scheduled to be filed in Q3 2016;
• − Massy: within the Ampère Atlantis integrated development zone (ZAC), benefiting from the largest transport hub in the outskirts south of Paris, launch of the pre-leasing for two projects involving more than 55,000 sq. m: Ampère & Newton, 30,111 sq. m in two buildings and Campus Eiffel Massy, 23,000 sq. m of modular offices, commercial facilities and medium-size supermarkets;
• − Marseille Parc Eiffel des Aygalades
• o Olivier: project to build a park entrance building with a floor area of some 3,600 sq. m,
• o Firm off-plan lease agreement (BEFA) for 12 years covering a building of approximately 2,000 sq. m, which was signed in early July 2016;
• − Aix-en-Provence Parc du Golf: Signature of an off-plan lease agreement (BEFA) in February 2016 with a company listed in the CAC 40, involving a floor area of 4,300 sq. m.

Increase in portfolio value

The Group's property assets at 30 June 2016 stood at €977.4 million, excluding transfer duties and expenses, of which €973.1 million represented investment properties and €4.3 million represented assets for disposal. 85% are office buildings in Ile-de-France. The portfolio value was € 915.3 million at 31 December 2015, the variation mainly being due to acquisitions during the period and the increase in appraisal values.

The valuation of the buildings indicates an average net yield (EPRA topped up) of 5.7% (against 5.9% at year-end 2015).

The EPRA vacancy rate has posted encouraging performance, to reach 9.1% (including 4.7% for Ile de France offices) at 30 June 2016. It stood at 11.8% at 30 June 2015 and 10.3% at 31 December 2015, primarily due to the reletting of buildings in the Ile-de-France region.

On this basis and after dividend distribution, the EPRA Triple Net Asset Value per share stood at € 57.4. It was € 56.2 per share at 30 June 2015 and € 58.1 per share at year-end 2015.

Debt and Loan To Value ratios (LTV) maintained

Overall gross debt as at 30 June 2016 stood at € 415.8 million, as against € 412.3 million at 31 December 2015.

Net debt (adjusted for cash invested as well as cash and cash equivalents) amounted to € 408.1 million.

Thus, the LTV ratio at 30 June 2016 represented 41.8% of property assets, valued net of tax at € 977.4 million, against 37.6% at year-end 2015.

The Company's average term of debt stood at 5.6 years at 30 June 2016 against 6.1 years at year-end 2015.

Following the overall refinancing process in 2015 and the decrease in variable rates, the Group's average interest rate for financing stood at 1.9% in the first half of 2016, against 3.6% in the first half of 2015.

Outlooks

"The first half results for 2016 continue on as expected from all the structural projects undertaken in 2015. The property company is strengthening its fundamentals and is applying its ambitious strategic plan designed to increase the size of its portfolio to € 1.5 billion in the next 2-3 years. We will maintain our pace of acquisitions according to strict investment criteria, and are now ready to carry out our developments on the Paris-Saclay research-intensive cluster (Massy and Orsay), one of the major business clusters in Greater Paris. In the regions, our constant focus is on enhancing our business parks and the recent signings of off-plan lease agreements (BEFA) are the best examples. Other projects will emerge in the coming months," said Philippe Lemoine, Managing Director of Société de la Tour Eiffel.

About Société de la Tour Eiffel

A listed real estate investment company (SIIC) on NYSE Euronext Paris, the company pursues a strategy focused on the ownership and the development of quality offices capable of attracting a wide range of quality tenants. The company's portfolio stood at 980 million Euros for 420,000 sq. m of assets mainly located in the Paris region as at 330 June 2016. Societe de la Tour Eiffel is listed on NYSE Euronext Paris (Eurolist B) - ISIN code: FR0000036816 - Reuters: TEIF.PA - Bloomberg EIFF.FP. Indexes: IEIF Foncières, IEIF Immobilier France

www.societetoureiffel.com

Press Contact Jean-Philippe MOCCI jpmocci@capmot.com Capmot Tel: +33 (0)1 81 70 96 33/+33 (0)6 71 91 18 83

APPENDIX

Key figures	Page 5
Portfolio	Page 8
Rental Income	Page 13
Financing	Page 15
NAV	Page 18
Cash flow and financial statements	Page 20

Key figures

Portfolio

Result

Cash flow and dividend

Market capitalisation

Financial structure

Valuation ratios

EPRA key performance indicators

Key figures

	30Jun2016	31Dec2015
Portfolio
Portfolio valuation at depreciated cost (€m)	797,1	751,6
Portfolio valuation at Fair Value (excl. Transfer costs) (€m)	977,3	915,3
EPRA NAV (*)	57,4	59,6
EPRA NNNAV (*)	57,4	58,1

	H1 2016	H1 2015 (***)
Results
Rental income (€m)	28,9	26,1
Current operating profit (€m)	10,8	13,4
Net profit - Group share (€m)	5,7	7,0
Net profit - Group share per share (€) (**)	0,6	1,1
Net recurring profit	7,3	5,0
EPRA earnings	15,8	13,6

	H1 2016	H1 2015
Cash flow and dividend
Recurring Cash Flow (€m)	20,8	13,6
Recurring Cash Flow per share (€) (**)	2,2	1,4
Dividend per share (€)	3,0	3,0
Pay out Ratio (Dividend / recurring Cash flow)	136%	209%

	30Jun2016	31Dec2015
Market capitalisation
Number of shares (**)	9 463 868	9 463 747
Share price (€)	53,1	54,0
Market capitalisation (€m)	502,4	511,0

	30Jun2016	31Dec2015
Financial structure
Consolidated Equity (€m)	355,6	378,2
Gross financial debt / Shareholders' equity	1,2	1,1
Net Group LTV	41,8%	37,6%
EBITDA / Financial costs	4,7	2,7

	30Jun2016	31Dec2015
Valuation ratios
Cash flow multiple (Capitalisation / cash flow)	12,1	15,8

(*) fully diluted number of shares at end of period

EPRA key performance indicators

	H1 2016	H1 2015	Diff %
EPRA earnings (1)
EPRA earnings in €m	15,8	13,6	16,1%
EPRA earnings in € per share (**)	1,7	1,4	16,0%

(1) EPRA earnings are defined as net recurring result coming from recurring activity.

The increase in EPRA earnings mainly stems from the decrease in financing costs, partly offset by the decrease in current operating profit.

	30Jun2016	31Dec2015	Diff %
EPRA NAV and EPRA NNNAV
EPRA NAV in €m	543,7	564,3	-3,7%
EPRA NAV in € per share (*)	57,4	59,6	-3,7%
EPRA NNNAV in €m	544,1	550,1	-1,1%
EPRA NNNAV in € per share (*)	57,4	58,1	-1,1%

EPRA NNNAV was impacted negatively by the dividend, and positively by the net operating income and the property Fair Value adjustment.

	30Jun2016	31Dec2015	Diff %
EPRA yield (EPRA NIY)
EPRA topped-up yield (2)	5,70%	5,96%	-4,2%
EPRA yield (3)	5,55%	5,84%	-4,9%

(2)EPRA topped-up yield (Net Initial Yield EPRA topped-up): annual rent at end of period, not adjusted for the rental concessions, net of service charges, divided by the portfolio valuation (Fair Value), transfer costs included

(3) EPRA yield (Net Initial Yield EPRA): annual rent as at end of period, adjusted for the rental concessions, net of service charges, divided by the portfolio valuation (Fair Value), transfer costs included

	30Jun2016	31Dec2015	Diff %
EPRA vacancy rate (4)
Portfolio up and let	10,11%	10,34%	-2,2%

(4) EPRA vacancy rate :it corresponds to an end of period spot rate defined as the ratio between the vacant space market rent and the up and let global portfolio (net of developments and redevelopments) market rent.

(*) fully diluted number of shares at end of period

(**) number of shares at end of period

Portfolio

Portfolio valuation at Amortised Cost

Portfolio valuation at Fair Value

Portfolio valuation at Fair Value

Portfolio value variation: core & non core business

Portfolio value variation per type of assets

Portfolio value variation on a like-for-like basis = +0.7% Amount of 2016 investments: € 53.3 m (cost price) / Amount of 2016 disposals: € 0.0 m

Portfolio EPRA yield

EPRA Topped-up yield	30Jun2016	31Dec2015	EPRA yield	30Jun2016	31Dec2015
Average portfolio yield	5,70%	5,96%	Average portfolio yield	5,55%
Offices Paris-IdF	5,62%	5,79%	Offices Paris-IdF	5,49%
Regional Offices	6,32%	5,91%	Regional Offices	5,88%
Total offices	5,70%	5,81%	Total offices	5,54%
Other assets	5,80%	7,84%	Other assets	5,80%

Portfolio EPRA yield per type of assets

EPRA Topped-up yield	30Jun2016	31Dec2015	EPRA yield	30Jun2016
Average portfolio yield	5,70%	5,96%	Average portfolio yield	5,55%
	5,6%	5,74%	Offices	5,5%
Sorting centres	7,3%	9,10%	Sorting centres	7,3%
Light industrial	-4,6%	-1,57%	Light industrial	-4,6%
Parcs Eiffel	6,3%	6,19%	Parcs Eiffel	6,2%

EPRA yield	30Jun2016	31Dec2015
Average portfolio yield	5,55%	5,84%
Offices	5.5%	5.65%
Sorting centres	7.3%	9.10%
Light industrial	$-4.6%$	$-1.57%$
Parcs Fiffel	6.2%	5.87%

(1) EPRA topped-up yield (Net Initial Yield EPRA topped-up) : annual rent at end of period, not adjusted for rental concessions, net of service charges, divided by the portfolio valuation (Fair Value), transfer costs included (2) EPRA yield (Net Initial Yield EPRA) : annual rent at end of period, adjusted for rental concessions, net of service charges, divided by the portfolio valuation (Fair Value), transfer costs included

Portfolio key indicators

Buildings < 10 years: 55 %

(in % of the net of transfer cost value)

Other buildings < 10 ans Buildings > 10 years

6% 49% 45%

Labelled new buildings

(in % of the net of transfer cost value)

Average lease term maturity in €m

Rental income

Rental income variation

Financing

Debt maturity schedule

Summary as at 30 June 2016

Financial structure

Hedging instruments

Debt maturity schedule as at 30 June 2016

Amount of consolidated debt as at 30 June 2016: €415.8 m

Financing - Summary as at 30 June 2016

Financial structure ratios

in €m	30Jun2016 31Dec2015		Diff %
Shareholders' equity	355,6	378,2	-6,0%
Gross financial debt	415,8	412,3	0,8%
Net financial debt	408,2	343,8	18,7%
LTV	41,8%	37,6%	11,2%
Average cost of finance	1,9%	3,2%	-42,1%
Hedging	84,8%	58%	45,6%
Debt maturity	5.6 years	6.1 years	96,8%
Group ICR (EBITDA / Financial cost)	4,7	2,7	76,8%

NB :

• Sensibility to a 100 bp increase to 3M Euribor on cost of debt: +€2.8m (on a yearly basis)

• Sensibility to a 100 bp decrease to 3M Euribor on cost of debt: -€1.3m (on a yearly basis)

Hedging - 30 June 2016

Hedging instruments notional as at 30 June 2016 : € 146.7m

NAV

EPRA NNNAV

Variation of EPRA NNNAV from 31Dec2015 to 30Jun2016

Cash flow and summarised financial statements

Cash flow

Net consolidated result and EPRA Earnings

Consolidated balance sheet

Recurring cash flow

in €m	H1 2016	H1 2015 (**)	Diff %
Gross rental income	28,8	26,1	10,2%
Recurring property operating expenses	-3,4	-2,3	49,4%
Recurring corporate expenses	-4,0	-2,9	36,2%
Net financial costs	-0,6	-7,3	-92,1%
Recurring cash flow	20,8	13,6	53,1%
Recurring cash flow (in € / share *)	2,2	1,4	53,1%

(*) Number of shares as at 30Jun2016: 9 463 868, number of shares as at 30Jun2015: 9 463 307

Net consolidated result and Net recurring result

	H1 2016		H1 2015 proforma (**)
in €m	Result	including Recurring	including Non recurring	Result	including Recurring	including Non recurring	Diff. Recurring result (%)
Gross rental income	28,9	28,9		26,1	26,1		10,6%
Net depreciation Impairment & provisions Property operating expenses	-9,9 -0,2 -3,8	-9,9 -0,1 -3,4	-0,1 -0,4	-8,5 0,4 -2,4	-8,5 0,4 -2,3	-0,1
Corporate expenses	-4,2	-4,0	-0,2	-2,2	-2,9	0,7
Current operating income % of rents	10,8 37,4%	11,5 39,9%	-0,7	13,4 51,2%	12,8 49,0%	0,6	##########
Result from disposals Other operating income and expenses	0,0 -0,1	0,0 -0,1	0,0	-0,1 0,3	0,3	-0,1
Operating income % of rents	10,7 37,0%	11,4 39,4%	-0,7	13,6 51,9%	13,1 50,2%	0,4	##########
Net financial cost Other financial income and expenses Net financial results	-4,5 -0,5 -5,0	-4,2 0,1 -4,1	-0,3 -0,6 -0,9	-8,1 1,6 -6,5	-8,1 -8,1	1,6 1,6	49,9%
Profit/loss before tax	5,7	7,3	-1,6	7,1	5,0	2,1	46,6%
Tax Net profit/loss (Group share) % of rents	0,0 5,7 19,8%	7,3 25,4%	0,0 -1,6	0,0 7,0 27,0%	0,0 5,0 19,0%	-0,1 2,0	47,9%
Net profit / loss (Group share) per share (*)	0,6	0,8	-0,2	1,1	0,8	0,3	-1,1%

(*) number of shares as at 30Jun2016: 9 463 7868; number of shares as at 30Jun2015: 9 463 307

(**) proforma following the option to value investment property at amortised cost

(**) proforma following costs presentation changes (personnel expenses and other overhead henceforth fully presented as corporate expenses)

EPRA Earnings

in €m	H1 2016	H1 2015	Diff %
Earnings per IFRS income statement	5,7	7,0	-18,9%
adjustments to calculate EPRA Earnings, exclude:
(i) Changes in value of investment & development properties / or net depreciation allowance	10,0	8,1	22,5%
(ii) P / L on disposal of investment & development properties	0,0	0,1	-100,0%
(iii) P / L on sales of trading properties including impairment charges in respect of trading properties	0,0	0,0	-100,0%
(iv) Tax on profits or losses on disposals	N/A	N/A	N/A
(v) Negative goodwill / goodwill impairment	N/A	N/A	N/A
(vi) Changes in Fair Value of financial instruments & close-out costs	0,2	-1,7	109,4%
(vii) Acquisition costs on share deals and non-controlling Joint Venture interests	N/A	N/A	N/A
(viii) Deferred tax in respect of EPRA adjustments	N/A	N/A	N/A
(ix) Adjusments above in respect of Joint Venture (non consolidated)	N/A	N/A	N/A
(x) Minority interests in respect of the above	N/A	N/A	N/A
EPRA Earnings	15,8	13,6	16,1%
number of shares as at 31 12 2015 (millions)	9,463868	9,463307	0,01%
EPRA Earnings per share	1,7	1,4	16,0%

Consolidated balance sheet

in €m	30Jun2016	31Dec2015	Diff	Diff%
Assets
Investment properties Assets earmarked for disposal Tangible fixed assets Intangible fixed assets Receivables Cash and equivalent	792,8 4,3 0,1 0,0 28,2 7,6	747,3 4,3 0,2 0,0 23,4 68,6	45,5 0,0 0,0 0,0 4,8 -61,0	6,1% 0,0% -11,0% -27,8% 20,7% -88,9%
Total ASSETS	833,0	843,7	-10,7	-1,3%
LIABILITIES
Share capital and reserves including result Long term debt Other liabilities	355,6 5,7 415,8 61,6	378,2 12,4 412,3 53,1	-22,6 -6,7 3,4 8,5	-6,0% -54,0% 0,8% 16,0%
Total LIABILITIES	833,0	843,7	-10,7	-1,3%