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15 February 2013

Cegereal - Annual Results - 2012 : New Momentum



Improved indicators:

  • IFRS rental income: €38.6m (up 11.8%)
  • Portfolio occupancy rate: 83% (up 18%)
  • Portfolio value: €865m excluding transfer costs (up 1.3%)
  • EPRA NNNAV: €35.7/share (up 4.4%)
  • Dividend: €0.65 per share (to be recommended at the June 26 AGM) + extra dividend(1)


2012 Business Performance:

  • New leases signed on 22,200 sq.m. in Arcs de Seine
  • €400m in refinancing arranged
  • Borrowing costs cut by some 20%
  • Go Green program launched


Outlook:

  • New green lease signed with Crédit Foncier on 31,900 sq.m. in Rives de Bercy
  • Recurring income per share expected to rise by around 30%
  • Increase in the dividend, with normal level expected to be reached by 2014

Cegereal's Board of Directors met on February 14 to approve the audited consolidated financial statements for the year ended December 31, 2012.

Raphaël Tréguier, Cegereal’s Chief Executive Officer, said:
As expected, 2012 was a busy year for Cegereal on both the financial and business fronts. The Company reaped all the benefits of the preparatory work carried out in 2011, which enabled it to meet its core objectives of marketing Arcs de Seine, one of the outstanding office buildings in the Western Paris suburbs, and refinancing its bank debt in full. In light of these developments, Cegereal plans to significantly increase the payout to shareholders by raising the dividend in each of the next two years.

Cegereal sets the standard in the ownership and management of modern, very large office properties let over the long-term to first-class companies looking for facilities that offer high value added amenities. Listed on NYSE Euronext since 2006, in compartment B, its market capitalization as of February 12, 2013 totaled €286 million.

BUSINESS REVIEW

Significant improvement in the rental situation across the entire portfolio

Arcs de Seine: 22,200 sq.m. let under new leases and leases on additional space

In line with its roadmap, Cegereal pursued its assertive strategy to remarket the renovated Arcs de Seine building.

Leases were signed with first-class tenants on a total of 22,200 square meters, lifting the property's occupancy rate to 63% at December 31, 2012 from 12% at the previous year-end:

  • Canal Plus leased 10,450 square meters in 2012 for its D8, D17 and i>télé channels.
  • Hewlett Packard leased 5,200 square meters to house its Paris region marketing teams.
  • Huawei Technologies signed a lease on 3,750 square meters.
  • An additional 2,800 square meters were leased to Boursorama. A tenant in the building for the last ten years, the company needed extra space and decided to lease the entire first floor of building A.

Visits are being organized of the 16,000 square meters of offices that have yet to be let and discussions are in progress with several potential tenants.

Rives de Bercy: lease on 31,900 sq.m. with Crédit Foncier renewed for 9 years

Crédit Foncier’s signature in January of this year (ahead of schedule) of a new 9-year “green” lease extends its tenancy by seven years, attesting to the bank’s satisfaction since it moved in back in 2003.

This triple net lease sets a new standard by including stringent undertakings by the owner and the tenant to meet certain environmental targets. It is a practical demonstration of Cegereal’s commitment to improving environmental performance embodied in the Go Green project.

Europlaza: delivery of the inter-company restaurant, ongoing improvements and signature of a new lease

During last summer, the Europlaza inter-company restaurant was refurbished in a project led by the Citti architecture firm that aimed to enhance the restaurant’s appeal and improve the dining experience.
The next step is to refurbish the shared meeting rooms. This project will be carried out in stages as the rooms are heavily in demand, with completion scheduled for the end of the year.
As of December 31, 2012, the property’s occupancy rate stood at 92%, with Yxime’s decision to lease 1,295 square meters as from April 1 offsetting the departure of SPSS.

Launch of the Go Green program

As part of the strategy to enhance and lock in the value of the portfolio, audits have been performed on all of the properties with a view to having their environmental performance certified.

The Arcs de Seine property was awarded HQE Exploitation certification by Certivéa on June 21 and preliminary technical audits were performed at Europlaza and Rives de Bercy in the latter part of the year. The results of these preliminary audits were promising and in-depth audits are now in progress in order to draw up detailed specifications of the upgrade work required.

A portfolio totaling over 130,000 sq.m., with an appraisal value of €865 million excluding transfer costs

The marketing programs and the measures to preserve the properties’ value over the long term have helped to lock in their appraisal values. At December 31, 2012, the portfolio’s total appraisal value was estimated at €865 million excluding transfer costs (€919 million including transfer costs), an increase of 1.3% compared with the year-earlier value.

The weighted average remaining life of the leases, as calculated at January 1, 2013 (and taking into account the new lease signed with Crédit Foncier in January 2013), was 7.8 years. This was significantly longer than the 5.8 years at the beginning of 2012, reflecting the many new leases signed during the year.

The portfolio’s overall occupancy rate was 83% at December 31, 2012, up sharply from 65% at the end of 2011.

IFRS FINANCIALS (consolidated)

Improvement in the main indicators

  • IFRS rental income up 11.8% to €38.6 million
  • Operating income 2.2x at €37.6 million
  • Net income sharply higher at €16.9 million

In 2012, rental income calculated in accordance with IFRS totaled €38.63 million, up 11.8% compared with 2011. Expense recoveries and penalties received from tenants – reported under “Income from other services” – amounted to €8.77 million, an increase of 19.9% that reflected the arrival of new tenants, mainly in the Arcs de Seine building.
Increased occupancy naturally drove up building-related costs, which amounted to €16.38 million.

Operating income (before net financial expense) sharply increased to €37.56 million in 2012 from €16.91 million in 2011. Fair value adjustments for the year to investment property represented a positive €9.38 million, illustrating the assets’ quality.
Cash flows from operations were negatively impacted by non-recurring debt refinancing costs in the amount of €9.38 million. They stood at €4.02 million versus €8.38 million in 2011.

Net income was nonetheless sharply higher in 2012, at €16.86 million compared with €0.24 million the previous year. EPRA earnings (which exclude fair value adjustments to investment property) came in at €7.48 million.

A robust financial position, with €400 million in financing arranged at a sharply lower interest rate

In July 2012, Cegereal refinanced its debt falling due in March 2013, ending 2012 with a loan-to-value ratio of 46.2% in line with its objective of less than 50%.

The original €400 million loan was replaced by a new 5-year facility for the same amount obtained from a pool of four banks.

The base rate (0.90%) was set in October 2012, allowing Cegereal to benefit from historically low rates. Including the spread, the actual rate is 3.15% plus an additional 0.25% applicable while the portfolio's overall occupancy rate is less than 90%.

This new fixed rate is considerably less than the 4.15% paid on the original facility.

In addition, the hard covenants are unchanged:

  • LTV capped at 70%
  • Interest cover of at least 1.5x.

Cegereal now has no bank debt falling due until August 2017.

EPRA NNNAV up 4.4% at €35.7 per share

The Company’s EPRA NNNAV excluding transfer costs rose by €19.41 million in 2012 to €476.28 million at the year-end, representing €35.7 per share versus €34.2 at end-2011. The increase corresponds to earnings per share (+€0.4), fair value adjustments to investment property (+€0.8), fair value adjustments to debt (+€0.4) and other impacts (-€0.2).

2012 dividend : €0.65 per share + extra dividend

At the Annual Shareholders’ Meeting on June 26, the Board will recommend paying a dividend of €0.65 per share. The dividend will be payable from July 18, 2013.

The Board also intends to propose paying an extra dividend for 2012, to be approved at a later Shareholders' Meeting.

Outlook

In 2013, Cegereal expects:

  • recurring income per share to rise by around 30%,
  • a gradual increase in the dividend with the aim of reaching a normal level in 2014. The Board of Directors also intends to pay a dividend per share of €1.50 for 2013.


Investor Calendar

  • May 16, 2013: First quarter revenue
  • June 26, 2013: Annual Shareholders’ Meeting
  • July 18, 2013: Dividend payment
  • July 25, 2013: First half results
  • November 14, 2013: Third quarter revenue

 

(1)The Board also intends to propose paying an extra dividend for 2012, to be approved at a later Shareholders' Meeting

 

About CeGeREAL (NYSE Euronext Paris – Compartment B - CGR)
Cegereal is a REIT-style property company (“SIIC”) that invests in very large prime office properties. Its portfolio currently comprises three office buildings located in the inner suburbs of Paris. The portfolio’s appraisal value, as estimated by independent valuers BNPP Real Estate as of December 31, 2012, was €865 million excluding transfer costs.   
www.cegereal.com

Media relations
Aliénor Miens - +33 1 53328477
alienor.miens@citigate.fr

Investor relations
Raphaël Tréguier - +33 1 42257636
info@cegereal.com