Officiis Properties : Half Year result 2018/2019

Press release         
Paris, November 29, 2018

First half of FY 2018/2019 consolidated net loss: -€33.0 million.
Disposal of the Think and Imagine buildings on October 26, 2018.

Consolidated net loss for the first half of FY 2018/2019 because of the negative value adjustment on buildings of €22.1 million.

Officiis Properties' Board of Directors met today and approved the half year audited financial statements for the period from April 1, 2018 to September 30, 2018.

Signature of a new lease on the Newtime building, departure of the tenant Faurecia

Between April 1, 2018 and September 30, 2018, Officiis Properties and its subsidiaries signed a new lease covering 905 sq.m in the Newtime building, representing €0.4 million of additional annualized gross rent.

At September 30, 2018, taking into account all signed leases at this date, including the ones which take effect at a later date, the financial occupancy rate of the buildings detained by Officiis Properties and its subsidiaries stood at 92.9%.The primary tenant of the Magellan building, the company Faurecia, who had notified Officiis Properties on June 30, 2018 of its intention to exercise its break option, has definitively left the building on November 23, 2018. Thus, on today's date, the financial vacancy rate[1] is 38.6%.

Rental income and portfolio value decrease

As of September 30, 2018, on the basis of the independent appraisals carried out by JLL, the overall portfolio's rental market value stands at €18.5 million, with a value including duties of €334.3 million, or a yield of 5.5%. The value excluding duties is estimated at €326.5 million, a decrease of €20.7 million since March 31, 2018. This decline (-6.0%) primarily reflects the increase in capitalization rates determined by JLL.

Gross rental income for the first half of financial year 2018/2019 reached €4.5 million, compared to €4.6 million during the first half of the previous financial year. Using a constant scope (the rents measured at June 30, 2017 took into account the revenues derived from the Salengro building in Marseille, which was disposed of on December 17, 2017), gross rents have increased by 11%.

Disposal of the Think and Imagine buildings

The meeting of the Board of Directors that took place on July 12, 2018 authorized the signature of the preliminary sales agreements of the Think and Imagine buildings in Neuilly-Sur-Seine.

The company has disposed of the Imagine building (sis 20 boulevard du Parc 92200 Neuilly-sur-Seine) on October 26, 2018, generating sales proceeds of €76.2 million after deducting the fees and costs related to the transaction.

On the same day, Officiis Properties Paris Ouest 1 has disposed of the Think building (sis 28-34 boulevard du Parc 92200 Neuilly sur Seine), generating sales proceeds of €62,8 million after deducting the fees and costs related to the transaction.

Those sales proceeds are in line with the appraised values of the assets at September 30, 2018.

Increase in financial expenses

Financial expenses which stood at €11.7 million for the first half of financial year 2017/2018, represent €13.2 million for the six first months of the financial year of 2018/2019. This increase in expenses is a result of the increase in borrowing costs of the outstanding non-bank loans by interest capitalization.

Increase of the Overall Debt Ratio, decrease of the Net Asset Value

At September 30, 2018, financial debt represented a total of €322.6 million (including accrued and/or capitalized interest), of which €133.2 million is mortgages^[2].

At September 30, 2018 mortgage borrowing (principal and accrued interests), net of cash and cash reserves (€15.4 million), represented 36.1% of the Company's portfolio value excluding duties (€326.3 million), versus 34.6% at March 31, 2018.

Overall debt ratio (including mortgages, non-bank loans, convertible bonds and related accrued and/or capitalized interests, net of cash and cash reserves)3 is still high, representing 94.1% of the Company's portfolio value (excluding duties) at September 30, 2018 (versus 85.9% at March 31, 2018).

The Company's consolidated shareholders' equity represented €20.0 million at September 30, 2018, compared with €52.4 million at March 31, 2018 (-62%). Shareholders' equity (€1.2 million) is above half of the company share capital.

The Company's non-diluted3 net asset value^[3] per share came to €0.86 (€2.50 at March 31, 2018). On a diluted basis, it represents €1.22.

Consequences of the disposals of the buildings Imagine and Think on the financial structure of the Group

Following the disposals of the Think and Imagine buildings on October 26, 2018, and in accordance with its loan agreements, the Group has utilized a portion of the proceeds of the disposals to reimburse a portion of its mortgage loans underwritten by the bank Helaba.

Officiis Properties has proceeded on the same day to fully reimburse its mortgage debt, which stood at €53.1 million, and Officiis Properties Paris Ouest 1 has reimbursed 115% of the debt attached to the Think building, or €23.3 million. Following this partial reimbursement, the balance of the mortgage debt stands at €56.4 million, or 30% of the market value of the buildings Newtime and Magellan appraised as of September 30, 2018 by the independent expert JLL.

Following the aforementioned disposals and the partial reimbursement of the mortgage debts, the Group has a positive cash position of €71 million. The Company has already solicited the bank Helaba to proceed to a partial reimbursement of €55 million of the non-bank loan. The €16 million balance will be utilized to finance the working capital needs and the renovation works program of the Magellan building (estimated to cost around €12 million including VAT).

Outlook

From an operational standpoint, as indicated in the press release dated July 12, 2018, the Company will:

• Pursue (i) the letting of the remaining vacant spaces in the building Newtime and (ii) its disposal;
• Put into place a renovation works program in the Magellan building that should last throughout 2019

From the financial standpoint, following the contacts made by the Company with a few banks to examine the possibility putting into place new financing backed primarily by the building Newtime, the Board of Directors has decided to mandate the bank Rothschild to organize a call for tenders for the refinancing of the entirety of the bank and non-bank debts of the Group.

From a financial perspective, the fiscal year 2018-2019 and the following one will continue to be impacted by the financial vacancy tied to the renovation of the Magellan building and the rent-free periods granted to the new tenants of the Newtime building.

It is recalled that the company REOF Holding S.à r.l., majority shareholder of Officiis Properties, has indicated that in the case that the disposal of the building Newtime should be realized, it would implement a public repurchase offer pursuant to Article 236-6 of the Autorité des Marchés Financiers ("AMF") General Regulations for the entirety of the shares of Officiis Properties, and, if need be, for all securities granting access to the shareholders' equity or voting rights of the Company that it does not hold, under such price conditions that would reflect the Net Asset Value of the company on the date it makes said offer.

The half-year financial rapport shall be provided to shareholders and investors latest on December 31, 2018.

Key figures for HY 2018-2019 (Consolidated IFRS figures)

Contacts

Pierre Essig, Chief Executive Officer, Officiis Properties

52B rue de la Bienfaisance, 75008 Paris

Tel: +33 (0)1 83 92 33 86,

For more information, and/or contact us, visit the company website: https://officiis-properties.com

About Officiis Properties

Officiis Properties is a listed property company that has opted for SIIC status and invests in office properties. Its real estate portfolio consists of two office buildings in the Paris region.

Officiis Properties shares are listed on Euronext Paris Compartment C, an NYSE Euronext market - ISIN: FR0010298901

Definitions

Financial vacancy rate

The rate of financial vacancy is obtained by dividing the vacant spaces multiplied by the market rental value of these spaces as defined by the independent evaluator by the sum of the vacant spaces multiplied by the market rental value of these spaces as defined by the independent evaluator and the rented spaces at their rent price contractually determined by the leases. As a result of the disposals of the Think and Imagine buildings and the departure of the tenant Faurecia, the rate of financial vacancy stands at 38.6% as of the date of this press release.

Liquidation NAV

The company has opted for the accounting of its properties at their fair value excluding rights. The Liquidation Net Asset Value (i.e. the amount that would be returned to shareholders in case of immediate cessation of business and sale of its buildings at their fair value excluding duties), corresponds to its consolidated shareholders' equity (€19,759 thousand) minus the equity component of the convertible bonds issued on July 31, 2015 (€ 2,786 thousand). The liquidation NAV thus amounts to €16,973 thousand at September 30, 2018.

Liquidation NAV per share

The Liquidation NAV per share on an undiluted basis is obtained by dividing the Liquidation NAV by the number of shares outstanding at the date of calculation of the Liquidation NAV, excluding treasury shares, i.e. 19,842,818 shares at September 30, 2018.

The liquidation NAV per share on a diluted basis is obtained by dividing the Liquidation NAV, adjusted by the impact on shareholder's equity of the conversion of the convertible bonds issued by the company on July 31, 2015 (+20.969 K€) by the number of potential shares on the date of calculation of the liquidation NAV, excluding treasury shares, i.e. 33,365,176 potential shares at September 30, 2018. The difference of 13,522,358 shares corresponds to the number of shares that would be created by the conversion of the convertible bonds issued by the company on July 31, 2015.

Operating Cash flow

Operating Cash flow is defined as consolidated net income (-€33,036 thousand), restated for changes in the fair value of assets (€22,329 thousand), impact of disposals of real estate (€0 thousand), loan issuance costs (€312 thousand), the reevaluation of isolated financial instruments (€358 thousand) and discounting of tenant security deposits (-€21 thousand). Capitalized interest (non-bank borrowings, convertible bonds) is not restated for the calculation of the Operating Cash flow because the cash outflow remains due even if deferred. Operating Cash flow was - €10,059 thousand at September 30, 2018.

Operating Cash flow per share

Undiluted Operating Cash flow per share is calculated on the basis of the weighted average number of outstanding shares during the period under review (excluding treasury shares), i.e. 19,847,384 shares for the period from April 1, 2018 to September 30, 2018.

The diluted Operating Cash flow per share is established on the basis of the weighted average number of potential shares (see above definition of the liquidation NAV per share) during the period under review (excluding treasury shares), or 33,369,742 shares for the period from April 1, 2018 to September 30, 2018.

Overall Indebtedness

The Overall Indebtedness Ratio compares the sum of:

• Mortgages (principal)                                                                                             132,770 K€
• Non-bank loans and shareholders' loans (principal)                                             142,500 K€
• Convertible bonds                                                                                                    26,599 K€
• Accrued interests and commissions                                                                       20,731 K€
• Available cash and equivalent                                                                                -15,445 K€

Total Consolidated Debts                                                                                      307,156 K€

To:

• Real Estate portfolio value (excluding duties)                                                       326,530 K€

Ratio :                                                                                                                                   94.1%