2024 half-year results - An adjusted Roadmap while keeping the company's key targets
The Board of Directors of Société de la Tour Eiffel, meeting on 23 July 2024, approved the financial statements for the half-year ended 30 June 2024. The audit procedures for these financial statements have been completed, and the corresponding reports are in the process of being issued.
"After a particularly difficult year for the entire sector in 2023, the first half of 2024 was unsurprisingly lacklustre for the French property market. We are continuing to implement our roadmap, adapting it to the market environment. Convinced of the need to transform our portfolio over the long term to keep pace with market trends, our teams are focusing their efforts on marketing our portfolio and adapting certain sites through ambitious and innovative transformation projects, while at the same time implementing a rigorous asset rotation programme. Given the major challenges it faces, particularly in terms of occupancy and financing, the property company is currently working with its partners to examine the best options for positioning itself for a return to sustainable growth," said Christel Zordan, Chief Executive Officer of Société de la Tour Eiffel.
Continued measured implementation of the roadmap, adapted to a volatile environment...
- Asset value down by 4.5% like-for-like at €1.7bn
- €17m in disposals carried out with a view to transforming the portfolio
- €38m in developments of assets with sound fundamentals
- Loan-to-value ratio (LTV) at 44.5% and EPRA LTV at 62.9%
- €440m in drawdown capacity
- Going concern NAV (EPRA NTA) of €36.4 per share, marked by the decline in portfolio value
- EPRA Topped-up Net Initial Yield: 4.8%
… with a view to transforming the portfolio and returning to sustainable growth
- Gross rental income at €41.2m, up 2.1% on a like-for-like scope, driven by indexation
- 95% of 2024 rents collected to date
- EPRA occupancy rate stable at 78.1% (vs 78.0%)
- Cost of debt still low at 1.71% thanks to interest rate hedging
- Consolidated net loss of €39.1m (vs a loss of €16.3m)
- Recurring net profit (EPRA earnings) of €15.0m, or €0.49 per share (vs €0.90)
- Recurring cash flow per share of €0.58 (vs €0.93)
A committed property company attentive to developments in the French real estate market...
Société de la Tour Eiffel is continuing its CSR initiatives, in line with the third pillar of its roadmap, and is particularly committed to reducing its environmental footprint and making its assets more resilient to climate change. With the support of an expert, the property company already has comprehensive energy monitoring and data collection systems for 100% of its assets, enabling it to work with tenants to improve energy consumption.
... and which has put innovation at the heart of its CSR strategy
For several years, Société de la Tour Eiffel has also been fully committed to innovation in its business activities. Through a dedicated CSR and innovation unit, Société de la Tour Eiffel is working on the management of construction, renovation and operational waste and on reuse, in line with the Booster du Réemploi initiative. The property company is managing these initiatives on each of its properties, in line with regulatory requirements.
A circular economy approach has been implemented for assets undergoing renovation/construction, and has been extended to the entire portfolio in a long-term perspective. The aim of this strategy is not only to reduce the carbon footprint of the property business, but also to promote initiatives to reuse materials by giving them a second life, thereby minimising the impact of its development activities and reducing the property company's resource footprint. In its development projects, Société de la Tour Eiffel uses geothermal energy and urban agriculture, as well as innovative paints and low-carbon materials. It is also implementing measures on its operational assets, such as water management on a dedicated platform, dematerialised car park management, greening of spaces and the use of reflective coatings on roofs.
Further sales of buildings not suited to the Group's challenges
In a property investment market still in a wait-and-see phase, the Group was able to sell two assets for €16.9m in the first half of 2024, at prices in line with the latest values in the accounts. Portfolio rotation is one of the pillars of our roadmap, and the slowdown in recent months is tending to draw out its implementation.
Update on developments
The EvasYon redevelopment in Lyon (formerly Lyon Dauphiné), on which work began last summer, will be handed over at the end of 2024 or the beginning of 2025. It is a mixed-use project comprising a 5,000 sqm office building and a 5,500 sqm co-living building. The co-living building was fully let with the signing of a 12-year off-plan lease agreement (BEFA) with a specialised operator.
At the Parc du Golf in Aix-in-Provence, construction began last summer on Jade, a 3,800 sqm office building. Structural work has been completed and handover is scheduled for the first quarter of 2025.
At Puteaux, on the banks of the river Seine just outside the La Défense district, the Group has obtained final planning permission to build a 9,700 sqm office building. Work began in September 2023. Demolition of the existing superstructure was completed in April. Structural work is now underway, with handover scheduled for the fourth quarter of 2025.
In the Eiffel Nanterre Seine park, on available land, the Company has begun development work on Nanturra, a 5,400 sqm multi-storey business hotel under the proprietary LILK brand. This multi-purpose building concept is designed to meet the need for business space and last-mile logistics near urban centres, while incorporating key CSR issues. A second similar 7,580 sqm project has been launched at the Syrah site in Bobigny. Handover is scheduled for this summer and the autumn of 2025 respectively.
The Aubervilliers site, which was vacated in 2021, is ideally suited for an ambitious redevelopment project in line with the roadmap's mixed-use objective. In the meantime, the site has welcomed Poush - France's first ever artist incubator project - turning it into an innovative and creative cultural space that will help project the image of Aubervilliers and the Greater Paris area.
These six projects are perfect examples of the property company's value creation strategy and are driving the development plan as administrative authorisations are obtained. The five projects launched (EvasYon, Puteaux, Nanturra, Syrah and Jade) represent a total of €10.5m in potential rental income.
Update on off-plan projects
The Millésime off-plan (VEFA) project, 4,500 sqm of offices in Issy-les-Moulineaux, has been pre-let to Les Nouveaux Constructeurs for 10 years, including 9 years firm. The upper floor slab above the ground floor has been completed and delivery is scheduled for the third quarter of 2025.
In addition, the second floor of the Manufacture off-plan project in Lyon, a 4,000 sqm mixed-use, reversible office/housing/retail development, has just been completed. Handover is scheduled for the third quarter of 2025 for the office/retail units and the fourth quarter for the residential units.
These investments fit with the strategy to transform the portfolio, with a focus on high-quality locations, secure rental income and high-environmental performance buildings.
A portfolio being transformed…
As of 30 June 2024, property values totalled €1,669m, 78% in offices (€1,297m), 11% in business/logistics premises (€181m), 10% in mixed use (€162m) and only a small proportion in managed residential properties. All of these properties are located in France, including 75% in Greater Paris (€1,251m). As part of the Group's ongoing efforts to improve the quality of its portfolio, 79% of assets have been environmentally certified or were eligible for certification at the end of 2023.
… to address major letting issues…
Deals were signed covering €5.1m in annualised rents during the period, breaking down as €1.4m in new leases and €3.7m rolled over. With the renegotiation of leases with the Versailles education authority (7,760 sqm) in Guyancourt and Equans (3,150 sqm) in Nanterre, the signing of leases with EFI (2,225 sqm) in Vélizy and Greenbig (1,140 sqm) in Puteaux, and the termination of leases with Air Liquide (9,470 sqm) in Champigny and the DGFIP (3,960 sqm) in Nantes, the net loss of annualised rental income was €2.8m. In a rental market that remains tight, our teams remain mobilised to meet the various deadlines.
As of 30 June 2024, the financial occupancy rate (EPRA) was stable at 78.1% (vs 78.0% as of end-2023), and the average term and firm lease periods were 5.5 years and 3.3 years respectively (vs 5.5 and 3.1 years at the end of 2023). Restated for planned vacancies (redevelopment projects), the occupancy rate was 83.6% (vs. 83.4%).
… and which is productive in occupied properties: 95% of H1 2024 rents collected
As of mid-July, out of a total of €41.6m in rents invoiced in the first half of 2024, 94.8% have already been collected (vs 96% in 2023).
This performance is the fruit of the internalised property and rental management model, combining thorough selection with proximity to tenants to build a quality rental foundation. In a fragile economic climate, the Company remains particularly vigilant and maintains close contact and dialogue with its clients.
Monitoring of tenant risk on the basis of Coface and Credit Safe ratings continues to indicate that more than 80% of the rental base consists of tenants belonging to the top two categories (low or very-low risk), thus demonstrating its resilience.
EPRA earnings down to €0.5 per share
On a like-for-like scope, gross rental income increased by 2.1%, driven by indexation (+5.5%). Overall, rental income fell by 1.2% to €41.2m, with the effect of disposals (-€1.8m) only partially offset by acquisitions (+€0.5m). Net rental income fell by 8.2%, reflecting the upward revision of expense budgets. In addition, the first half of 2023 also benefited from a €1.0m catch-up of service charges, creating an unfavourable comparison base for 2024.
Current EBIT came to €22.0m (vs €24.6m), reflecting a €0.7m reduction in operating costs, in line with the adjustments made to the Group's structure, and a fall in fees for managing works for lessees. In 2023, other income and expenses benefited from insurance payouts totalling €1.1m.
Financial expense increased to €6.8m (vs €5.2m), with an average interest rate of 1.7% (vs 1.3%), 2023 having benefited from exceptional income of €1.2m on derivatives (caps). Caps, which had become obsolete with rates close to 0, proved to be the main contributors to this improvement last year. Most of these caps were due to expire at the end of 2023. At the same time, the swaps at -0.5% used to maintain a relatively low interest rate will continue paying off until the end of 2024. The Company also entered into other swaps in a total nominal amount of €325m maturing in 2026 at an average rate of 2.61%.
After taking into account other income and expenses, taxes and the earnings of companies accounted for using the equity method, EPRA earnings (recurring net profit) came to €15.0m, or €0.49 per share (after taking into account the cost of perpetual subordinated debt instruments (TSDI) in EPRA earnings per share).
After all EPRA restatement adjustments (allocations, reversals, net gains on disposals and changes in the value of financial instruments), consolidated net income was negative €39.1m, compared with negative €16.3m in 2023.
Recurring cash flow for the period totalled €9.6m, or €0.58 per share, vs €0.93 in 2023.
Sharp decline in net asset value, reflecting the adjustment in portfolio value
The valuation of the Company's assets as of 30 June 2024 was down 4.5% on a like-for-like scope compared with the end of 2023, and includes disparities between regions. This decline is the result of the continued rise in interest rates, which pushed the average capitalisation rate used in appraisals to 6.01% (+20bp vs end-2023). This fall was marginally limited by the impact of rental income.
Going concern NAV (EPRA Net Tangible Assets) per share fell from €40.8 to €36.4 at end-June 2024, mainly due to the adjustment to the value of the portfolio (-€4.6 per share). EPRA liquidation NAV (NDV) per share, which also includes the increase in the value of hedging instruments, fell from €41.9 to €38.1.
Adjusted implementation of the roadmap and anticipation of future financing challenges
As announced with the presentation of its roadmap in 2022, Société de la Tour Eiffel is continuing to adapt its portfolio by reducing the proportion of office properties to two-thirds of its portfolio in order to promote a greater diversity of uses. It also aims to strengthen its regional coverage by locating a third of its assets in major French cities. Finally, our teams are committed to achieving the highest standards of environmental performance and responsibility across the board, notably through the certification of at least 80% of our assets. Reflecting this approach, in April the Company established a €90m 7-year responsible credit line linked to the achievement of targets for reducing energy consumption, certifying developments and training employees on ESG challenges.
In a persistently complex market environment, the property company continues to focus its efforts on the sustainable transformation of its portfolio in response to changes in the French property market. Since the launch of its plan, the Group has disposed of almost €200m in assets that no longer met its objectives, demonstrating its rational and dynamic portfolio management.
With the support of its Board of Directors, Société de la Tour Eiffel is staying on course and anticipating the management of its next major financing maturities. Faced with structural challenges, in particular the pressure on the ICR covenant (EBITDA/financial expense) due to the rise in interest rates - and the time it is taking for them to ease - Société de la Tour Eiffel is working with its partners to examine all possible solutions to consolidate its financial structure and return to sustainable growth.
Agenda
- 24 July 2024: Analysts' conference (SFAF)
- February-March 2025: 2024 full-year results (after market close)
- April-May 2025: General Meeting of Shareholders
- July 2025: 2025 half-year results (after market close)
The results presentation will be available on the Group's website on the morning of Wednesday 24 July: Financial information - Société Tour Eiffel (societetoureiffel.com).
Contacts
Media relations
Laetitia Baudon
Consulting Director - Agence Shan
+33 (0)6 16 39 76 88
laetitia.baudon@shan.fr
Investor relations
Aliénor Kuentz
Head of Client Relations - Agence Shan
+33 (0)6 28 81 30 83
alienor.kuentz@shan.fr
About Société de la Tour Eiffel
With a property portfolio amounting to €1.7bn, Société de la Tour Eiffel is an integrated property company with a strong culture of services. This agile company operates in various asset classes, including offices, urban logistics, managed residential and retail, in Greater Paris and other major French metropolitan areas. An active player throughout the property cycle, it assists its tenants - companies of all sizes and sectors - through high-standard direct management of its properties. Société de la Tour Eiffel conducts a pro-active and transversal CSR policy that is an integral part of its strategic orientations.
Société de la Tour Eiffel is listed on Euronext Paris (B board) - ISIN code: FR0000036816 - Reuters: TEIF.PA - Bloomberg: EIFF.FP
www.societetoureiffel.com
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