SFL – Financial information for the third quarter of 2022

PARIS–(BUSINESS WIRE)–Regulatory news:

With an exceptional increase in rental income of 17% (+8% at constant scope), SFL (Paris:FLY) ddemonstrates the effectiveness of its strategy based on the continuous improvement of the architecture, technical characteristics and environmental performance of its assets. In addition to the growth in rental income, the portfolio’s EPRA vacancy rate stands at an extremely modest level of 0.6%.

Rental income up sharply by 16.7% to €151.7 million:

Consolidated revenue by business segment (in thousands of euros)

Rental income:

2022

(9 months)

2021

(9 months)

To change

Paris CBD

116,743

105,571

+10.6%

Paris Other

32,825

22,842

+43.7%

Western Crescent

2,163

1,569

+37.9%

Total rental income

151,731

129,982

+16.7%

Consolidated rental income for the first nine months of 2022 amounts to €151.7 millionsuddenly €21.7 million or 16.7% compared to €130.0 million reported for the same period of 2021. The increase breaks down as follows:

  • 9.3 million euros like-for-like growth (i.e. excluding any portfolio changes affecting period-to-period comparisons), or 7.8%, driven by the increase in rental income from the Edouard VII, 103 Grenelle and Washington Plaza buildings, particularly on new rentals. The indexation of rents also contributes to this by approximately €1.3 million (+1.1%).
  • €5.6m rental income from areas under redevelopment or renovation over the periods concerned, mainly following the delivery in the second half of 2021 of the 83 Marceau building, which is fully occupied.
  • €6.8 million relating to the acquisition of the Pasteur building in April 2022, which generated a significant increase in rental income, partially offset by the disposal of the 112 Wagram and 9 Percier buildings in early 2021.

SFL is benefiting both from its strategy centered on prime real estate and from the current momentum of the Parisian rental market. Rental activity was sustained over the period despite an occupancy rate of 99%, with 36,000 m². rented year-round until September 2022:

Dimitri Boulte, Chief Executive of SFL, said: “Despite difficult geopolitical and economic conditions, the tertiary rental market in Île-de-France is becoming increasingly polarized, with companies opting for high value-added properties located in the center of Paris. In this environment, SFL’s strategy is bearing fruit: our performance indicators are solid overall, demonstrating the effectiveness of our business model despite persistent uncertainties.

The recovery of the rental market in the center of Paris observed since the end of 2021 has led to notable commercial successes for SFL – in particular for quality properties in prime locations – for example in Biome.

During the first nine months, SFL signed leases on nearly 36,000 m² of space with an average nominal rent of €704 per m²a average non-cancellable term of 8.2 years and an incentive rate of around 17%. These figures bear witness to the solidity of the Paris market and the resilience of SFL’s economic model. Leases include:

  • Biomewith the complex 22,000 m² offices pre-let to La Banque Postale and SFIL;
  • 103 Grenelle, with three new leases signed with Atalante, Promontoria MMB and Netgem for a total of 3,400 m²;

  • Edward VII, with leases signed for 2,700 m², including one for 1,700 m². sales unit with Style Factories;

  • 176 Charles de Gaulle in Neuilly, with leases signed for 1,900 m², including one for 1,200 m². retail unit with Ovelo Cycles.

As of September 30, 2022, the occupancy rate of income-generating properties reached a record level of 99.5% (compared to 98.0% as of December 31, 2021). The EPRA vacancy rate is 0.6% (compared to 1.7% as of December 31, 2021).

Following the acquisition of the Pasteur building (approximately 40,000 m² located in Paris 15e borough) for 484 million euros including costs and the sale of the Le Vaisseau building (approximately 6,300 m² located in Issy-les-Moulineaux) for 27 million euros excluding costs in the first half of 2022, SFL did not any other acquisition or disposal during the third quarter.

Funding: a very reasonable loan-to-value ratio

SFL’s consolidated net debt amounted to €2,473 million as of September 30, 2022, compared to €1,792 million as of December 31, 2021, representing a loan-to-value ratio of 27.7% based on the appraisal value of the portfolio as of June 30, 2022. The average cost of debt after hedging is 1.2% and the average maturity was 4.1 years. At the end of September 2022, the interest coverage ratio stood at 5.9x.

In addition, SFL has 940 million euros in undrawn credit lines as of September 30, 2022.