Société de la Tour Eiffel
Paris : EIFF

March 20, 2013 12:58 ET

Societe de la Tour Eiffel: 2012 Annual Results and New Strategy

PARIS--(Marketwire - Mar 20, 2013) -


2012 annual results & new strategy

Net recurring income up 11% and a strategic refocus on Paris office properties

The 2012 year-end accounts were adopted by the Board of Directors at its meeting of 20 March 2013 under the chairmanship of Mark Inch.

Consolidated figures

+-------------------------------------------------------------------------+
|                   MEUR                 2012   2011  Like-for-like change|
+-------------------------------------------------------------------------+
|Rental income*                         69.5    69.4  + 4.5%              |
|                                                                         |
|EPRA earnings                          34.0    30.6                      |
|                                                                         |
|Net result (Group share)                    -6.1    29.4                 |
|                                                                         |
|  Of which value adjustments and disposal   -39.4   -0.4                 |
|                                  results                                |
|                                                                         |
|Recurring cash flow                         35.7    33.0    +13.7%       |
|                                                                         |
|Portfolio value (net of transfer costs)     915.4   999.2 -2.8%          |
|                                                                         |
|EPRA NNNAV                                  378.1   392.8                |
+-------------------------------------------------------------------------+
                                                                          |
+-------------------------------------------------------------------------+
|EPRA financial occupancy rate                91.6%  91.3%                |
|                                                                         |
|Net LTV                                      55.9%  57.6%                |
|                                                                         |
|Average maturity of bank debt                 5.3    2.2                 |
--------------------------------------------------------------------------+
                                                                          |
+-------------------------------------------------------------------------+
|              EUR / share **                                             |
+-------------------------------------------------------------------------+
|EPRA earnings                               5.6     5.3                  |
|                                                                         |
|Recurring cash flow                         5.8     5.8                  |
|                                                                         |
|EPRA NNNAV ***                              62.2    69.2                 |
|                                                                         |
|Dividend                                    4.2**** 4.2                  |
+-------------------------------------------------------------------------+

* Disposals close to EUR110 million in 2011/2012

** Number of shares: 6,110,611 at 31 December 2012 and 5,736,272 at 31 December 2011

*** Number of shares diluted: 6,079,909 as at 31/12/2012 and 5 678 114 as at 31/12/2011

**** EUR2.10 interim dividend paid in October 2012 and EUR2.10 final dividend to be proposed to the AGM on 30 May 2013

Significant increase in recurring income

EPRA earnings (EUR34.0 million) and cash flow (EUR35.7 million) improved significantly in 2012 (respectively 11% and 8%) despite some EUR110 million of disposals completed in 2011 and 2012, which incidently also enhanced the overall portfolio quality.

Net income (Group share) was -EUR6.1 million in 2012 against EUR29.4 million, mainly due to negative valuation adjustments on the portfolio(-EUR30 million) and hedging instruments (-EUR8.3 million).

Strong operating performance

Dynamic asset management enabled Société de la Tour Eiffel to again take full advantage of the qualities of its property portfolio completing nearly 60,000 sq. m of lease renewals and new lettings (EUR5.8 million in annual rent); on a like-for-like basis, rents rose by 4.5% in 2012.

This strong operating performance resulted in the EPRA financial occupancy rate remaining at a high level of 91.6% at year-end 2012, against 91.3% at 31 December 2011.

Constant portfolio rejuvenation with a gradual refocus on Paris offices

The Group's portfolio comprises more than 20% of green buildings with recognised environmental certificates and 41% of new or sub-ten-year old properties. Its value net of transfer costs totalled EUR915 million against EUR999 million at year- end 2011; the decrease was primarily due to sales (EUR70 million in 2012, achieved at an average of 1.5% below last appraisal value), conducted as part of the active management of the portfolio, but also to a reduction in value of 2.8% on a like-for-like basis (compared with 31 December 2011) mainly concerning sorting centres and regional business parks. The asset values of offices in Ile-de- France, the company's core business and the focus for its new strategy, remained stable.

Pursuing its asset rotation policy, the company is accelerating refocusing on the Paris office market: more than EUR40 million of property was under contract for sale at 31 December 2012 and nearly EUR65 million to date this year; EUR 30 million have been sold since the 1(st) January 2013. The EPRA NNNAV amounts to EUR62.2 / share against EUR69.2 at year-end 2011 under the combined effect of the reductions in property values partly attributable to increased transfer costs (- EUR4.9 / share) and hedging instruments (-EUR1.4), the 2012 distribution in cash (- EUR1.9) and in shares (-EUR4.4), offset by EPRA earnings (EUR5.7 / share). Ignoring the dilution caused by the creation of 6.5% of new shares as the partial distribution of the 2012 dividend by scrip issue, EPRA NNNAV amounted to EUR66.6 per share, i.e. a decline of only 3.8%.

A secure financial structure and cost of debt under control

One of the highlights for 2012 was that the Group continued its deleveraging and completed the restructuring of its financing, thus achieving the objective to defer, segment and extend the average life of its debt through anticipated refinancings of EUR490 million.

Consequently, this process enabled the Group to: - Improve net LTV from 60.4% to 55.9% over the past two years, thanks to i) nearly 20% in net debt redemption (EUR115 million) resulting from the disposals carried out in 2011 and 2012, and ii) to the accelerated amortization of existing loans; - Reduce the average borrowing rate to 3.2% in 2012 (against 3.5% in 2011), the Group having subscribed EUR430 million in new hedging instruments under extremely attractive conditions given the historically low interest rates; - Significantly extend its average debt maturity to 5.3 years at year-end 2012.

As a result of these refinancings and its proactive deleveraging, Société de la Tour Eiffel has no significant debt maturity until 2017 and has secured an average annual finance cost of less than 4% over the next five years.

Dividend maintained in 2012 and change announced for 2013

Following the 2012 interim dividend of EUR2.10 per share paid last October, the Board of Directors has decided to propose to the AGM on 30th May next the payment of a final dividend of EUR2.10 per share, i.e. an overall distribution of EUR4.20 per share for 2012, representing 72% of the net recurring cash flow paid in cash or in shares at the election of each shareholder.

For 2013, the company intends to continue its emphasis on deleveraging by announcing a temporary change in its distribution policy and lowering its dividend objective to 3.20 euros per share paid in cash.

Governance and new management

An executive succession plan was drawn up with effect from 1 September 2012, under which the functions of Chairman and Managing Director were separated. In accordance with the plan, Mr Mark Inch, while retaining his position as Chairman of the Board of Directors, resigned as Chief Executive Officer and was replaced by Mr. Renaud Haberkorn. Mr. Robert Waterland resigned as Deputy Chief Executive Officer, remains a Board member and has been appointed Chairman of the Investment Committee. Mr. Frédéric Maman was appointed Deputy Managing Director from 1 September 2012, in charge of investment and asset management.

Finally, Mr. Jérôme Descamps announced his resignation from his position as Deputy Managing Director and board member and will leave the company at the end of March; the new Chief Financial Officer will take over his duties early in April.

A new strategy focusing on Paris offices

The Company has defined a new strategy enabling it to resume its growth in the coming years. This new strategy involves (i) refocusing its activity on offices in the Paris region, (ii) scaling-up its value creation operations and (iii) an improved risk profile.

The Company will continue to privilege assets that meet occupier requirements, providing well located space at an affordable overall cost and offering state- of-the-art facilities. A 5 to 15% portion of the future portfolio will also be devoted to value creation, whether through speculative forward purchases, properties with short leases, or potential for refurbishments. Société de la Tour Eiffel has substantial expertise and a proven track record established over the past fifteen years in these areas. Furthermore, half of the company's property portfolio already meets the defined criteria. Another aspect of the strategy is an improved risk profile, with a portfolio in which 85 to 95% of assets are income producing and the LTV is reduced to 45%.

Work in progress

Detailed during the presentation of the company's annual results, this strategy was initiated in 2012 by pro-active risk management in particular with the renegotiation of the company's debt on attractive terms, extending the average maturity to 5.3 years. This dynamic was furthered by the sale of EUR70 million of non-core assets and the establishment of a new management team responsible for revitalizing the company.

In 2013-2014, Société de la Tour Eiffel will continue its refocusing phase with further disposals of mature, non-strategic assets, negotiation of lease extensions, LTV reduction to 45% and consequently mechanically aligning its dividend objective down to 3.20 euros per share, paid in cash. In addition, the Company may make opportunistic investments in partnerships.

As of year-end 2014, the company will display a new profile: it will be able to reinvest the revenue from disposals in strategic assets and distribute 70- 80% of its recurring income in cash.

CALENDAR:

- 14 May 2013 (after market close): turnover and activity for Q1 2013

- 30 May 2013 (11 am) : Annual General Meeting, Automobile Club de France, Place de la Concorde, 75008 Paris

- 24 July 2013 (after market close): Half Year Results 2013

Audit procedures on 2012 accounts have been performed. The statutory report is pending.

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 office and business space capable of attracting a wide range of tenants in both established and emerging locations. The company's portfolio stands at 915 million Euros of assets spread evenly between the Paris area and the regions.

Société de la Tour Eiffel is listed on NYSE Euronext Paris (compartment B) - ISIN code: 0000036816 - Reuters: TEIF.PA - Bloomberg EIFF.F. Indexes: GIEIF Foncières, IEIF Immobilier France.

Société de la Tour Eiffel: 2012 annual results & new strategy: http://hugin.info/143560/R/1686758/553088.pdf

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Source: Société de la Tour Eiffel via Thomson Reuters ONE

[HUG#1686758]

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