ALTAREA : half-year financial report 30 June 2024

HALF-YEAR FINANCIAL REPORT

JUNE 30, 2024

ALTAREA – 2024 half-year financial report - Page 1 sur 66

AGENDA

1       BUSINESS REVIEW ................................................................................................................ 3

2       CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS .............................. 22

3       STATUTORY AUDITORS' REPORT ..................................................................................... 64

4       STATEMENT BY THE PERSON RESPONSIBLE FOR THE HALF-YEAR FINANCIAL

REPORT ................................................................................................................................ 66

1    BUSINESS REVIEW

CONTENTS

1.1 ALTAREA, AN UNRIVALLED PLATFORM OF SKILLS DEDICATED TO LOW-CARBON URBAN TRANSFORMATION........................................................................................................................... 5

1.2 OPERATIONAL PERFORMANCE............................................................................................... 6

1.2.1  Retail............................................................................................................................................................................................. 6

1.2.2  Residential................................................................................................................................................................................... 9

1.2.3  Business property (BP)............................................................................................................................................................ 11

1.2.4  New businesses........................................................................................................................................................................ 12

1.3 TAXONOMY: NEW STANDARD FOR ENVIRONMENTAL PERFORMANCE REPORTING... 14

1.3.1  A key indicator for Altarea....................................................................................................................................................... 14

1.3.2  Taxonomy results...................................................................................................................................................................... 14

1.4 FINANCIAL PERFORMANCE.................................................................................................... 15

1.4.1  2024 half-yeart results............................................................................................................................................................. 15

1.4.2  Net asset value (NAV)............................................................................................................................................................. 16

1.4.3  Financial resources.................................................................................................................................................................. 18

1.1 ALTAREA, AN UNRIVALLED PLATFORM OF SKILLS DEDICATED TO LOW-CARBON URBAN TRANSFORMATION

Altarea, a unique business model

The strength of Altarea’s model sits fundamentally on the immense market of urban transformation driven by changes in usage, fundamental housing needs, urban design recast and low carbon evolution. 

To address this huge market, the Group has developed an operating system that is unique in France, enabling it to act with the most comprehensive real estate offering, the expertise in highly specialised stills and recognised brands. Above all, Altarea can count on the commitment of its employees who embrace “Altarea’s values” of high standards, innovation, and performance. The Company’s business plan is based on a strong corporate commitment around the content of work, the sense of common social benefits as well as the value creation and sharing.

Urban transformation, the engine of growth

The urban transformation market, in which Altarea holds a leading position, is more than ever an immense market, for which                 the technical,                administrative,        financial,                 and environmental entry barriers are high and are becoming stricter (Net Zero Artificialization, Energy Performance Diagnosis, Tertiary Decree, RE 2020, Taxonomy, etc.).

The successive crises of recent years (health, environmental, social) have highlighted the need to thoroughly rethink the organisation and functioning of our cities. Many real estate infrastructures have become obsolete and have to be transformed to adapt to both the changes in use that now affect almost all real estate products, and to climate change (energy efficiency).

A strategic roadmap embedded in the new real estate cycle

The real estate crisis triggered by the rise in interest rates in 2022 marks the end of a cycle that lasted nearly 15 years. This crisis is particularly severe, and no sector of the real estate market is spared.

At the beginning of 2023, Altarea set itself a strategic roadmap that includes two years of adaptation to the change in the property cycle (2023 and 2024) and three years of ramp-up, both in its historical businesses and in new businesses (photovoltaics, data centres and real estate asset management).

At the end of the adaptation period to cycle change, Altarea anticipates a ramp-up of its FFO⁽¹⁾, which should, within a four-year timeframe, exceed the high point reached in the previous cycle, but on a new basis.

Throughout the life of its roadmap, Altarea intends to rely on its solid financial structure, largely owing to the recurring nature of its retail REIT.

Progress of the roadmap & outlook

At the end of June 2024, the strategic roadmap is being implemented on schedule. After a year 2023 dedicated to reducing risks and to clearing the impact of the previous cycle, the first half of 2024 was committed to laying the foundations for the new cycle in both the historic businesses and the new activities.

In the second half of 2024, Altarea will pursue the same policy:

•              building on the quality and performance of its Retail portfolio;

•              maintaining a high level of operational and financial discipline in property development ;

•              continuing to invest in new generation Residential offer and New businesses.

The Group confirms its FFO growth target for 2024, the quantum of which will depend on changes in the macroeconomic and political environment.

(1) Unless there is further deterioration in the macroeconomic, geopolitical, sanitory, or regulatory environment.

1.2 OPERATIONAL PERFORMANCE

1.2.1 Retail

Retail, Altarea's historical business, accounts for the vast majority of the Group's capital employed, with assets under management of €5.2 billion at the end of June 2024, generating €323 million in recurring revenues⁽²⁾.

In recent years, shopping centres have undergone a profound transformation of their model, which has enabled them to emerge stronger from sanitary crisis and to return to an excellent operational performance.

1.2.1.1 A RELEVANT ASSET MANAGEMENT STRATÉGY

Altarea has pursued a strategy of selecting the most promising formats (large shopping centres, travel retail, retail parks, convenience stores) and currently manages a portfolio of 43 particularly high-performancing shopping centres.

These assets are mainly held in partnerships with leading institutional investors. This strategy allows it to extend the value of its operational expertise on the number of assets under management, while optimising return on capital employed.

1.2.1.2 EXCELLENT OPERATING PERFORMANCE

Tenant’s revenue⁽³⁾ and footfall⁽⁴⁾ 

All retail types recorded excellent operational performance, notably with solid growth in tenant’s revenue, due to both the attractiveness of the sites and the quality of the tenants commercial offering.

Financial vacancy 

Financial vacancy rate is at a level considered optimal.

(2) Figures at 100% (€2.2 billion in assets for €139.8 million in gross rental income, Group share).

(3) Cumulative change in tenants revenue incl. VAT in France and Spain.

(4) Cumulative change in the number of visitors, measured by Quantaflow for equipped shopping centres, and by counting cars for retail parks (excluding travel retail), in France and Spain.

Rental activity

Rental activity remained dynamic in the first half of 2024, driven by demand from leading brands attracted by the quality of the Group's assets, including:

•               at CAP3000 notable events such as the arrival of Pull&Bear, the transfer of Intersport, the extension of the successful Greek restaurant Yamas in the Corso wing or the expansion, at the beginning of June 2024, of Mango over 1,000 m² with an expanded offering for men/women/children; 

•               the contineous development of the leisure offering at Bercy Village with Ocean 12, an immersive family mini golf course; • the deployment of the catering offer at Qwartz with the signatures of Starbucks and Brendy’s. The center also welcomes the return to France of Wycon, a Beauté Santé brand; 

•               in retail parks, numerous renewals signed in personal equipment (Orchestra) or leisure, notably the King Jouets brand on several sites. 

The first half of 2024 was also marked by the deployment of new ephemeral concepts such as the pop up stores imagined at CAP3000 (Lipault) or at Bercy Village with the Heinz or Sodastream event operations.

Consolidated net rental income

Like-for-like change             6.9          +7.0% o/w indexation              5.3           +5.4%

Net rental income at end-June 2024 (6 months) was up 7.7% (7.0% on a like-for-like basis).

The collection rate⁽⁵⁾ stood at 97.0%, equivalent to presanitary crisis levels.

Value of assets under management (AuM)

Against a general drop in real estate values, retail assets remained virtually stable, with a slight fall in property exit rates⁽⁶⁾ to 6.03% on average (+11 bps). 

(5)                   Rents and charges collected compared to rents and charges due at the publication date.

(6)                   The exit rate (or “capitalisation rate”) is used by appraisers to capitalise rents in the terminal period of their DCF models. It reflects the fundamental quality of the asset over the medium and long term.

1.2.1.3 DEVELOPMENT                                              

Paris-Austerlitz station                                                                         

After the successful transformation of the Paris- Montparnasse station, Altarea started work on a major 

project to restructure the retail spaces at Paris-Austerlitz station in H1, which will eventually include nearly 25,000 m²  of shops directly connected to the station. The marketing  phase should begin in 2025.

Bobigny Cœur de Ville

On the site of the former Bobigny2 shopping centre built on a slab in 1974, Altarea is developing a new disctrict comprising  1,200 residential units, an office building, a cinema and  around thirty shops and service. 

The 14,000 m² commercial programme includes an mediumsized food court (2,500 m²), food shops, services (La Poste,  hairstylist, optician, pharmacy, laundromat, etc.), a fitness

room and three Social and Solidarity Economy (SSE) brands, as well as restaurants around a central landscaped square.  

Work is nearing completion, with delivery scheduled for the                

2nd half of 2024 and inauguration for early 2025.

Enox 2 (Gennevilliers)

Work for Enox 2 food park, an off-plan sale project developed

for BNP Paribas REIM France is on-going. Entirely let to the Bertrand Franchise group, the 4 units (1,600 m²) are due to  be delivered at the end of 2024 to Burger King, Au Bureau,

Volfoni and Pitaya. The centre is aiming for BREEAM Very

Good certification.                                                                                    

Installation of electric charging stations                                           

As part of the partnership signed in early 2022 with Electra,  the French specialist in ultra-fast recharging (50-300 kW), Altarea is continuing the deployment of recharging stations in  car parks at its retail sites.      

In the first half of 2024, the Limoges and Villeparisis sites  were equipped, bringing to 7 the number of sites equipped

out of the 19 planned. Brest Guipavas and L'Avenue83 are  currently undergoing work.    

Over the first half of the year, more than 17,000 recharging  sessions were sold, saving 410 teqCO₂.  

Assets under management at end-June 2024

CAP3000 (Nice)                                                                                 105,600                                                               33%                       

Espace Gramont (Toulouse)                                                              56,700                                                               51%                       

Avenue 83 (Toulon-La Valette)                                                          53,500                                                               51%                       

Qwartz (Villeneuve-la-Garenne)                                                       43,300                                                             100%                       

Sant Cugat (Barcelona, Spain)                                                         43,000                                                             100%                       

Bercy Village (Paris)                                                                           23,500                                                               51%                       

Le Due Torri (Bergamo – Stezzano, Italy)                                       44,300                                                               25%                       

La Corte Lombarda (Bellinzago, Italy)                                             21,200                                                               25%                       

Espace St Quentin (St Quentin en Yvelines)                                                                 34,800                                                            0%    

NicEtoile (Nice)                                                                                    17,300                                                                  0%                       

                                                                                                                                                                                            51%                       

                                                                                                                                                                                            51%                       

                                                                                                                                                                                            51%                       

                                                                                                                                                                                         100%                       

                                                                                                                                                                                            51%                       

                                                                                                                                                                                            51%                       

                                                                                                                                                                                            51%                       

                                                                                                                                                                                            51%                       

                                                                                                                                                                                            51%                       

                                                                                                                                                                                            51%                       

                                                                                                                                                                                            51%                       

                                                                                                                                                                                            51%                       

                                                                                                                                                                                         100%                       

                                                                                                                                                                                            51%                       

                                                                                                                                                                                            51%                       

                                                                                                                                                                                            50%                       

                                                                                                                                                                                              0%                       

                                                                                                                                                                                         100%                       

                                                                                                                                                                                          100%                       

                                                                                                                                                                                         100%                       

                                                                                                                                                                                            25% 

                                                                                                                                                                                            25% 

                                                                                                                                                                                            18% 

                                                                                                                                                                                              0% 

                                                                                                                                                                                              0% 

                                                                                                                                                                                              0% 

                                                                                                                                                                                              0% 

1.2.2 Residential

Altarea is the second-largest residential developer in France⁽⁷⁾. The Group has a country-wide presence and has rolled out a comprehensive multi-product offering⁽⁸⁾ based on brands with complementary positions to meet the structurally immense needs of the French market:

•               Cogedim is the Group’s leading brand in terms of geographical coverage, product range depth and reputation. In 2024, for the second year running, Cogedim was ranked number one among the Top 200 customer relations by consulting firm The Human Consulting Group for Les Echos, all sectors combined;

•               Woodeum x Pitch Immo is the French specialist in lowcarbon real estate development due to its know-how on CLT (cross-laminated timber) timber frame technology but also to other low-carbon solutions that outperform current standards (RE2020/Level 2022);

•               Histoire & Patrimoine is the expert brand in real estate renovation and rehabilitation, offering a range of products in Historical Monuments, Malraux Law properties and Real Estate Tax schemes;

•               Nohée specialises in developing managed residences for active seniors. With 33 residences in operation at the end of June, including the last two inaugurated at the start of the year in Avignon and Villefranche-sur-Saône, Nohée aims to operate 50 residences by 2026, and 10 residences are currently under construction;

•               Altarea Solutions & Services is the service platform supporting the Group’s customers and partners throughout their real estate project (sales promotion, financing, rental management, trustee services, etc.).

The brands have operational independance (customers, products) but are supported by the power of the Group under Altarea umbrella brand (strategy, commitments, finances, support functions).

(7)                   Source: Classement des Promoteurs (developers ranking) published in June 2024 by Innovapresse.

(8)                   New housing all ranges (home ownership and investment, free, social, Intermediate rental housing), serviced residences, Malraux, historical monuments, land deficits, condominium, timber-frame housing CLT, renovation. (9) New orders net of withdrawals, in euros, including VAT when expressed in value. Data at 100%, except for operations under joint control which are reported in Group share.

1.2.2.1 HIGHLIGHTS OF THE FIRST HALF 

New orders⁽⁹⁾

In the first half of 2024, new orders fell sharply and mainly concerned the remaining offer from the previous cycle, which is now almost entirely sold out.

The average booking rate¹⁰ was 10.4%, and the fall in new orders was mainly due to the historically low level of offer for sale.

Offer 

Offer represented 3,055 units at the end of June 2024, including 1,787 units under construction, half the level recorded at the start of 2023⁽¹¹⁾.

The Group has voluntarily implemented a policy giving priority to selling off the offer from the previous cycle, by regularising sales, slowing commercial launches and reducing land acquisitions.

Notarised sales 

Commercial launches  

Land acquisitions  

(10) Average monthly new orders compared with the average monthly offer (retail offer of new homes) over the first 6 months of the year. The offer for sale is sold out in less than 12 months when the rate is over 8%. (11) Offer of around 6,000 units, including 3,500 units under construction (figures from early 2023). At 30 June 2024, the amount of finished products inventory is virtually nil (14 units).

1.2.2.3 OUTLOOK

Land options⁽¹²⁾

Land options signed during the first half of the year corresponded to projects in the market that are compatible with the Group's new commitment criteria, in particular those for the new generation offering, which already represents around 1,300 units for first-time buyers.

The “Nouveau Neuf”, Altarea's response to the property purchasing power crisis Individual buyers are the core target of Group’s strategy. Altarea has developed a new generation offering aligned to the purchasing power of the French, to enable first-time buyers to become homeowners. This offer is adressed to clients (with incomes barely over the minimum wage) who are currently renting in the private or social sectors and who never imagined they would be able to become the owners of their residence.

The idea is to take the customer's purchasing power as a starting point and offer them a product tailored to their capacity. The design and all the cost components have been completely reworked to come up with a product that is affordable, low-carbon and profitable.

This new product is proposed along with a new and highly attractive range of financing options, with loans at subsidised rates, no deposit, no down payment, no notary fees and no interest. The buyer only starts paying when the keys are handed over, and the monthly payments offered are close to, or even equivalent to, the price of a rent.

This offering, known as “Le Nouveau neuf”, represents a new approach to residential property development that is set to permeate the entire Group, with operational and commercial organisation, development and commitment criteria reflecting this new approach.

May 2024 : Market launch of the 1rst Le Nouveau Neuf programme (Rive Nature, Villeneuve-la-Garenne)

Located face to the Seine, this residence is built around a 7,600 m² urban forest with 110 tall trees and a friendly square with two shops at the foot of the building and a 30-bed crèche. With its 2,800 m² of green roof and its green corridor, this project is fully in line with an ecological and responsible approach.

This ambitious project is characterised by its commitment to sustainable development and the well-being of its residents. Comprising 10 RE 2020 buildings with NF Habitat HQE® certification, it includes 640 apartments ranging from studios to 5-room duplexes. The design of all these apartments has been optimised to provide pleasant, ergonomic living spaces at affordable prices.

The architecture, designed by international architects Valode & Pistre, combines modernity and aesthetics, helping to enhance this new urban development, which will form the new gateway to Villeneuve-la-Garenne.

Prices are particularly attractive, with a two-bedroom for €831 per month and a three-bedroom for €1,078 per month (no deposit, no pre-delivery costs). Backlog

The backlog⁽¹³⁾ at 30 June 2024 was €2.5 billion excl. tax, (vs €2.7 billion excl. tax at end-December 2023).

 12 Signature of new land options.

(13) Revenue (excl. tax) from notarised sales to be recognised on a percentageof-completion basis and individual and block new orders to be notarised.

1.2.3 Business property (BP)

Altarea manages Business Property projects with limited risk and in various manner due to its highly diversified skill set.

1.2.3.1 MULTIPLE AREAS OF EXPERTISE

In Offices, the Group operates nationwide⁽¹⁴⁾:

•               as developer in off-plan sales, off-plan leases and PDCs, with a particularly strong position in the “turnkey” user market and DPM contracts⁽¹⁵⁾;

•               as developer/investor or co-investor for certain assets to be repositioned (before disposal);

•               on a wide range of products: head offices, multi-occupant buildings, high-rise buildings, business and industrial premises, hotels, schools and campuses.

In Logistics, the Group operates:

•               as a land and property developer and sometimes investor, to develop projects that meet increasingly demanding technical, regulatory and environmental challenges; • both for the development of large platforms or hubs for distributors or e-commerce players, and in the urban logistics market for the last mile.

1.2.3.2 ACTIVITY OF THE HALF-YEAR 

Offices/Grand Paris 

The Group is concentrating on developing its services activity, with two PDC signed in Paris in the first half of the year for the Madeleine (21,000 m²) and Louis Le Grand (3,000 m²) projects. It also delivered 26 Champs-Elysées (14,000 m²) at the end of April, a completely refurbished complex combining offices and retail units. 

One of the major events of the first half of the year was the obtention of the final building permit for the renovation of the former CNP headquarters above Paris-Montparnasse station. This 55,000 m² project, developed in a 50/50 partnership with Caisse des Dépôts, will undergo a complete restructuringl over the next few years.

The Group's other projects have made good operational progress, particularly in terms of commercial discussions.

Offices / Regional cities 

In the regions, the Group delivered three office buildings in Toulouse this semester, totalling 12,000 m² (rue Laurencin, Hill Side in Jolimont and Urbanclay).

Two new projects were provisioned in Nice and Nantes, totalling 13,000 m².

(14)                 Central Business District (CBD) of Paris, the Paris Region and major regional cities.

(15)                 PDC (property development contract) and DPM (delegated project management).

16 Puceul (44) for 38,000 m², Ecoparc Côtière in La Boisse (01) for 56,000 m² and Bollène (84) for 191000 m².

17 260,000 m² developed in 5 phases aiming for BREEAM certification.

1.2.4 New businesses

As part of its strategic roadmap, Altarea has decided to invest in new activities: photovoltaics, data centres and property asset management.

These new markets are driven by immense needs, with high barriers to entry linked to the mastery of complex know-how.

For each of these new activities, Altarea's strategy is to control the operational value chain (investing in skills) while systematically adopting an optimised capital model.

1.2.4.1 PHOTOVOLTAICS

Decarbonisation     of             the           French    Economy                should significantly increase demand for photovoltaic. This demand should be around 100 peak gigawatts (GWp⁽¹⁸⁾) by 2050⁽¹⁹⁾, which means doubling the current rate of new generation development to 7 GWp annually.

Altarea believes it can take a significant market share in a ‘developer/asset manager/operator’ model, with a full range of photovoltaic infrastructure adapted to sites in operation, under development or being refurbished, for the Group's own property projects or those of major landowners:

• car park shading systems (including on its portfolio of managed shopping centres) ;

• photovoltaic roofs on its property projects (particularly logistics warehouses);

• ground-mounted solar power plants on brownfield sites (quarries, wasteland, landfill sites, etc.); • agrivoltaics as a complement to agricultural activity, on the ground or integrated into buildings (barns, sheds, greenhouses, etc.).

Altarea has set up a dedicated team operating under the Altarea EnR brand, enabling it to master the entire operational value chain: 

• studies, feasibility, design, land management;

• administrative authorisations (construction, connection) and financing;

• marketing of the energy produced;

• installation and commissioning;

• operation, monitoring, maintenance and recycling.

The Group's teams are working on a pipeline of projects at various stages of completion, mainly in France but also in Italy: more than 1,000 MWp are under study, including more than 400 MWp of controlled projects at 30 June.

Infrastructure integrated into the Group's property projects

Altarea now systematically integrates photovoltaic power stations into its property developments wherever possible.

(18 )Watt-peak: theoretical maximum power reached at peak production by a solar panel.

(19) Report on energy futures 2050 by RTE. At 31 March 2024, the capacity of

France's solar photovoltaic installations stood at 21.1 GW, including 20.3 GW

Photovoltaic shading systems are currently being deployed at our retail properties. In particular, the first two projects, each with a capacity of 500 kWpat the La Vigie retail park near Strasbourg and the Nîmes Family Village. Today, Altarea has obtained authorisations for the deployment of around 20 MWp at ten sites.

In the logistics sector, the Bollène platform will also be equipped with a rooftop photovoltaic plants with a total capacity of around 20 MWp.

All in all, Altarea is in control of several dozen megawattpeak units linked to its property projects, providing an interesting complement both for the Group (creation of additional value) and for users (comfort, self-consumption, environmental responsability).

Man-made sites and agrivoltaics

The bulk of the Group's pipeline concerns ground-mounted power plants on man-made sites or accompanying agricultural activities (agrivoltaics).

At the beginning of 2024, an initial partnership agreement was signed with Terrena, a major agricultural cooperative based in the west of France and comprising almost 19,000 farms. This partnership, which will initially focus on sheep farmers before opening up to other types of production (cattle, poultry, wine production, etc), ultimately represents the completion of several dozen projects from 2026.

Altarea has expertise in several hundred megawatt-peak projects of all sizes at various stages of development.

Altarea also supports major property owners (retail, industrial, hospitals, logistics) in third-party investment in connection with their CSR policies and the necessary adaptations to regulations.

Acquisition of Prejeance Industrial

At the beginning of July 2024, Altarea acquired French company Prejeance Industrial from Spanish group Repsol. Prejeance Industrial specialises in developing small and medium-sized rooftop photovoltaic projects (between 100 and 500 kWp), mainly on agricultural sheds. Its experienced team (18 employees) is involved at every stage in the life of solar power plant projects: development, construction, asset management, financing/refinancing. These facilities offer genuine renewable energy solutions, while providing farmers with additional income and farm equipment at no extra cost to the farmer. 

At the end of June 2024, the company owned and operated a portfolio with a total installed capacity of 42 MWp, located entirely in France, and was developing a pipeline of controlled projects totalling almost 400 MWp, including 41 MWp currently under construction.

The investment amounts to around €140 million (€25 million in goodwill and €115 million in solar power plants in operation, under construction and being

in mainland France. Source: Ministry for Ecological Transition and Territorial Cohesion.

assembled). Prejeance Industrial will be consolidated in the Group's accounts from the 2nd half of 2024.

Through this transaction, Altarea is completing the development of photovoltaic installations that will be implemented from 2023 with the creation of Altarea EnR, and is increasing its capacity to develop low-carbon energy.

1.2.4.2 DATA CENTERS

Demand for data centers is growing strongly in France, driven by the digitisation of the economy, the rise of artificial intelligence and the desire of many players to relocate their data storage within the country. The current installed base suffers particularly from a structural undersizing that is particularly acute for eco-responsible data centres (selfgeneration and energy recovery, connection to urban heating networks, etc.).

Altarea's ambition is to develop two types of product: medium-sized colocation data centres and single-user hyperscale data centres.

Altarea can draw on its internal network, which covers the whole of France, to identify the most suitable property opportunities for this activity.

Eco-responsible colocation data centres

Local data centres are designed for corporate customers (private    or             public),    providing                 connectivity,           high performance, high security and high availability.

The Group intends to develop eco-responsible data centres with heat recovery and reinjection into urban heating and cooling networks. Altarea has set up a team operating under the brand name NDC (Nation Data Center) French hosting company promoting responsible digital practices and working on around fifteen potential sites in the main French cities (Paris, Lyon, Marseille, Toulouse and Nantes).

In the first half of 2024, the Group continued work on its first two data centres, launched in 2023:

•               6,500 m² at Val-de-Reuil near Rouen, with assets adapted to the needs arising from the emergence of AI;

•               3,000 m² at Noyal-sur-Vilaine near Rennes, with a target capacity of 3 MW, scheduled to open in early 2025.

The aim is to develop and operate a network of co-located data centres using a ‘developer - asset manager’ financial model.

Hyperscale data centres

Depending on the opportunities and specific situations, particularly in relation to the development of Artificial Intelligence, the Group could be led to develop hyperscale storage or computing data centres in partnership with major players in the digital industry, based on a

‘developer/business provider’ model, in a context where this type of product is both rare and highly complex from an administrative point of view.

1.2.4.3 ASSET MANAGEMENT

Altarea Investment Managers: first acquisitions and SRI label for the SCPI Alta convictions

Altarea Investment Managers, which was accredited by the Autorité des Marchés Financiers in 2023, now has a full management and investment team. Its aim is to gradually extend its distribution agreements to the general public, particularly through external networks and wealth management advisers (WMA), and to develop a comprehensive range of property investment vehicles.

The Alta Convictions SCPI, its first retail fund launched at the end of 2023, sits on the theme of the ‘new property cycle’, with no inventory or pre-crisis financing. Fund collection is ramping up, as do investments, with the aim of diversifying both sectorally and geographically. Following several acquisitions in the retail sector (Paris, Annecy), the latest signature in July 2024 marks the diversification of the portfolio towards business premises (Orléans). In June, the SCPI was awarded the SRI label, underlining its commitment to responsible and sustainable management.

ATREC: real estate debt platform in partnership with Tikehau Capital

In 2023, Altarea has launched of a real estate debt platform in partnership with Tikehau Capital through a first fund, called ATREC (Altarea Tikehau Real Estate Credit), is targeting €1 billion in capital, including a commitment of €200 million from its sponsors (€100 million each) with a view to welcoming third-party partners.  This platform capitalises on Tikehau Capital and Altarea’s complementary expertise in private debt and real estate assets, and will provide investors with privileged access to the combined pipeline of the two groups and their respective networks to seize the most attractive investment opportunities.

The fund will offer a huge range of flexible solutions, primarily targeting the financing of assets (offices, retail, industrial assets, residential, logistics and hotels) or traditional real estate companies through junior, mezzanine or single-tranche debt instruments. A first deal was closed by the end of 2023 and a significant pipeline of opportunities is currently under review, confirming the relevance of this strategy.

1.3 TAXONOMY: NEW STANDARD FOR ENVIRONMENTAL PERFORMANCE REPORTING

The Taxonomy Regulation is a classification system for economic sectors to identify environmentally sustainable activities. It defines uniform criteria for each sector in the EU to assess their contribution to the six environmental objectives defined by the European Commission.

Non-financial companies have to publish indicators taken directly from their accounts (revenue, Capex and Opex) attributing for each the proportion eligible under the taxonomy (eligibility rate) as well as the proportion that meets the European environmental criteria (alignment rate) and social criteria (minimum social guarantees).

From 2024, financial companies have to publish the share of their investments that finance sustainable economic activities aligned with the taxonomy (Green Asset Ratio or GAR). Financial institutions with a high GAR should eventually benefit from a more favourable framework for their activities, as the goal pursued by the European Union is to drive funding towards the ecological transition.

1.3.1 A key indicator for Altarea 

Altarea is a pioneer in measuring environmental performance. The Group was one of the first French real estate companies to include a predominantly taxonomyaligned revenue target into its strategic roadmap⁽²⁰⁾. Similarly, since 2023, taxonomy alignment objectives have been integrated into employee remuneration and management compensation⁽²¹⁾.

Significant resources have been deployed to deliver digitised collection, control and standardised referencing of more than 5,000 documents to justify the alignment of the programmes concerned and create a reliable audit trail.

Thus, starting from the 2023 financial year, the methodology for calculating taxonomy alignment and its result has been subject of a report issued by E&Y⁽²²⁾, the Group's auditors, one year ahead of the regulatory requirement.

Published quarterly according to the same schedule as regulated information, revenue alignment has become a key performance indicator for the Group. Altarea considers it a decisive asset for access to financial resources on favorable terms in the current context (real estate crisis and credit scarcity). For instance, after signing in July 2023 the first corporate bank loan integrating a revenue alignment clause with the Taxonomy, the Group has introduced this clause into all its corporate loans.

(20)                 In 2023, Altarea was one of the nine French companies to submit a "Say on Climate" resolution at its General Assembly. Source: 2023 French "Say on Climate" report published by the Forum for Responsible Investment. 

(21)                 This was achieved notably through the Group Profit-Sharing Agreement and in the variable remuneration criteria for management (Say on Pay). (22 )The 2023 Taxonomy Report (limited insurance) is available on altarea.com, under the Finance/Publications section, and the detailed methodology is available in the DPEF chapter of the 2023 Reference Document.

1.3.2 Taxonomy results

97.6% of consolidated revenue eligible

In the first half of 2024, 97.6% of Altarea's consolidated revenue²³ was eligible under the European taxonomy for activities related to "Construction of new buildings" (Property Development), "Renovation of existing buildings," and "Acquisition and ownership of buildings" (mainly Retail REIT).

59.6% of consolidated revenue aligned

The alignment rate⁽²⁴⁾ reached 59.6% of consolidated revenue in the first half of 2024, showing consistent progress (44.0% for the 2022 financial year, 48.1% for 2023, and 55.6% in Q1 2024).

(23) Out of total revenue of €1,197.3m as of June 30, 2024, €28.2m (2.4%) were not eligible under the taxonomy (such as activities of property management, Cogedim Résidences Services, Altarea Solutions and Services). (24) The calculation of the alignment rate for H1 2024 does not take into account the 2nd paragraph of sub-criterion f of DNSH 5a ‘products hazardous to health’, as there is no consensus on how this sub-criterion should be applied.

ALTAREA – 2024 half-year financial report - Page 14 sur 66

1.4 FINANCIAL PERFORMANCE

1.4.1 2024 half-yeart results

At 30 June 2024, consolidated sales totalled €1,197.3m, down 4.2% compared with the first half of 2023, mainly due to the decline in property development, both Residential (-4.3%) and Business Property (-21.9%). The contribution from Retail is increasing with a sharp rise in revenue (+9.7%).

Operating profit rose by 31.6% to €121.6m. It includes :

• 106.0m in Retail (up 13.1% on H1 2023), with net rental income up 7.7% and good level of fees;

• 23.8m in Residential (vs. €5.5m in H1 2023), representing 2.5% of sales. These results come from transactions from the previous cycle, with the contribution from new generation transactions only expected from the end of the year;

• 7.5m in Business property, or 8.3% of sales. This contribution is exclusively related to Office (services in Ile-de-France and development in the Regions);

• overhead costs associated with the development of New businesses are fully expensed.

The cost of net debt fell sharply in the first half. It took advantage of substantial income from cash investments and of the positive impact of the Group's interest rate hedging position.

Overall, net recurring result (FFO)⁽²⁵⁾, Group share reached €57.9m (vs. €21.7m in H1 2023). Consolidated net profit (Group share) came to €26.8m at end-June (vs. €-17.8m in H1 2023).

(25) Funds from operations (FFO): net income excluding changes in value, estimated expenses, transaction costs and changes in deferred tax. Group share.

1.4.2 Net asset value (NAV)

1.4.2.1 GOING CONCERN NAV FULLY DILUTED(²⁶) AT €106.2/SHARE

Other unrealised capital gains                                                                       355.4                                                          355.4                    

Deferred tax on the balance sheet for non-SIIC assets^(a)                                            20.4                                                               22.4                           

Fixed-rate market value of debt                                                                     108.9                                                          167.6                    

Effective tax for unrealised capital gains on non-SIIC                                                 (11.7)                                                             (11.7)                          

Optimisation of transfer duties^(b)                                                                          68.2                                                            68.6                    

General partners’ share^(c)                                                                              (12,4)                                                                                       

NNNAV (NAV liquidation)                                                  2,146.9                                                                                        

(a)International assets.                                                                                                           

(b)Depending on disposal method (asset deal or securities deal)                           

(c) Maximum dilution of 120,000 shares.                                                                                                                 

1.4.2.2 CHANGE IN NAV 

                                                                                   (1,0)%                 (1,4)%

(a) Including free shares, depreciation and amortisation, share of equity-method affiliates at market value, General Partners’ share  

The unrealised capital gain on property development  remained stable compared with 31/12/2023.     

As a reminder, over the last two years the value of Property                 

Development in the NAV value has been adjusted  downwards by €-826.7 million (€-458.5 million in 2023 and  

€-368.2 million in 2022).                                                                            

(26) Market value of equity view of maintaining the Group’s activity and considering the potential dilutive effect resulting from the partnership limited by shares (SCA) status.

1.4.2.3 CALCULATION PRINCIPLES

Asset valuation

Investment properties

Property assets are represented at their appraised value in the Group’s IFRS statements (Investment properties). 

Retail assets are valued by multiple appraisers. The breakdown of the valuation of the assets by experts is detailed below:

The appraisers use two methods:

•               discounted cash flow (DCF method), including exit value at the end of the period;

•               capitalisation of net rental income, based on a yield rate that takes into account the site’s characteristics and rental income (including variable rent and market rent of vacant premises, adjusted for all charges borne by the owner). 

These valuations are conducted in line with the criteria set out in the Red Book – Appraisal and Valuation Standards, published by the Royal Institution of Chartered Surveyors. The surveyors’ assignments were all carried out in accordance with the recommendations of the COB/AMF Barthès de Ruyter Report and fully comply with the instructions of the Appraisal Charter of Real Estate Valuation (Charte de l’Expertise en Évaluation Immobilière) updated in 2017. Experts are paid at lump-sum fee based on the size and complexity of the appraised properties. Fee is therefore totally independent of the results of the appraisal.

Other assets

The unrealised capital gains on other assets consist of:

•               the Residential and Business Property Development divisions (Cogedim, Woodeum x Pitch Immo, 

Histoire & Patrimoine); 

•               the Retail Asset Management (Altarea France) and Business Property (Altarea Entreprise Management) divisions.

These assets are appraised once a year by external appraisers on annual closing: Retail Asset Management (Altarea France), the Property Development division (Residential and Business property) and the Business Property Asset management division are valued by appraisers Accuracy. 

The method used by Accuracy is the discounted cash flow method (DCF) in conjunction with a terminal value based on normalised cash flow. Accuracy provides a range of values calculated using different scenarios. In addition to its DCF valuation, Accuracy also provides a valuation based on listed peer group comparable. 

Tax

Because of its SIIC status, most of Altarea’s assets are not subject to capital gains tax, with the exception of a limited number of assets which are not SIIC-eligible due to their ownership structure, and of assets owned outside France. For these assets, capital gains taxes on disposals are deducted directly from the consolidated financial statements at the standard tax rate in the host country, based on the difference between the market value and taxes value of the property assets.

Altarea took into account the ownership structure of nonSIIC assets to determine Going Concern NAV after tax, since the tax considered in Going Concern NAV reflects the tax that would effectively be paid if the shares of the company were sold or if the assets were sold building by building.

Transfer taxes

In the IFRS consolidated financial statements, investment properties are recognised at fair value excluding transfer taxes. To calculate Going Concern NAV, however, transfer duties were added back in the same amount. In Altarea’s NNNAV, duties are deducted either based on a transfer of shares or on a building by building basis depending on the legal structure that holds the asset.

General partners’ share

The share of general partners represents the maximum dilution provided for under the Group’s Articles of Association in the event of liquidation of the limited partnership (where the general partner would be granted 120,000 shares).

1.4.3 Financial resources

1.4.3.1 MAJOR EVENTS

During the first half, the Group finalised the signature of several bank loans that had been renegotiated in 2023:

•               corporate loans of €476 million maturing in 2029, including a clause aligning them with the European Taxonomy⁽²⁷⁾;

•               a €90 million, 7-year mortgage⁽²⁸⁾ on the Sant Cugat shopping centre in Spain.

On 5 July, the Group strengthened its consolidated shareholders' equity by €92.0 million, of which : • €91.3 million due to the partial payment of the dividend in shares, resulting in the creation of 1,080,657 new shares;

•               €0.7 million from a capital increase reserved for the employees' FCPE, resulting in the creation of 8,930 new shares.

1.4.3.2 AVAILABLE CASH

At 30 June 2024, Altarea had available cash of

€2,286 million (€2,410 million at 31 December 2023).

The unused credit lines at corporate level correspond to RCF lines amounting to €1,296m, none of which were drawn down at 30 June 2024. 

On 5 July, available liquidity was used to redeem €255 million of bonds.

Short and medium-term financing

The Group has two NEU CP programmes⁽²⁹⁾ (maturity less than or equal to one year) and two NEU MTN⁽³⁰⁾ programmes (maturity greater than one year) for Altarea and Altareit. At 30 June 2024, the outstanding amount of these programmes was nil.

(27) These loans now include an EU Taxonomy linked loan clause.

(28) This mortgage loan is also ‘Green’ in the sense of the ‘Green Loan Principals’ laid down by the Loan Market Association, as the San Cugat shopping centre is aligned with the European Taxonomy

1.4.3.3 NET DEBT⁽³¹⁾

Change in net debt in the first half of 2024 Net debt stands at €1,849 million, compared with €1,647 million at the end of 2023. 

The €202 million increase in net debt is directly linked to investments in the Group's high value-added projects: retail (notably Gare de Paris-Austerlitz), Business property (largescale logistics, etc.), decarbonisation activities and new businesses (data centres, asset management, etc.).

New Residential working capital was virtually stable during the first half, after being reduced by around €350 million in 2023.

Net debt structure and maturity

After redemption of the bond issue on 5 July for €255 million, the average gross debt maturity⁽³²⁾ is 3 years and 9 months, compared with 3 years and 6 months at 31 December 2023. After taking into account available cash, the effective maturity of the debt is 4 years and 5 months.

(29) NEU CP (Negotiable European Commercial Paper).

(30) NEU MTN (Negotiable European Medium Term Note).

(31) Net bank and bond debt.

(32) Excluding Property Development debt.

Long-term debt by maturity

The chart below (in €m) presents the Group’s long-term debt by maturity⁽³³⁾.

The Altareit 2025 bond issue is already covered by available liquidity, mainly in the form of invested cash.

The 2028 mortgage is backed by the CAP3000 shopping centre (St-Laurent du Var), the 2030 mortgage by the Qwartz shopping centre (Villeneuve-la-Garenne) and the

2031 mortgage by the Sant Cugat shopping centre (Barcelona). All the Group's other consolidated assets are mortgage-free.

Hedging: nominal and average rate

Altarea benefits from a significant interest rate hedging position reflexting the Group's overall risk management policy.

(b)            After hedging, prorata consolidation.

(c) Average hedging rate and average swap rate on fixed-rate debt (mid-swap rate at the pricing date of each bond, excluding credit spreads).

Average cost of debt: 1.59% (-56 bps)

The average cost of gross debt fell in the first half of 2024 due to the positive impact of the Group's hedging position.

(33) At date of publication and excluding short-term Property development financing.

1.4.3.4 RATIOS AND COVENANTS

Loan to Value (LTV)

The LTV ratio compares consolidated net bond and bank debt to the consolidated market value of Group assets.  

(a)            Market value (including transfer taxes) of shopping centres in operation recognised according to the fully consolidated method.

(b)            Market value (including transfer taxes) of shares of equity-method affiliates carrying shopping centres and other retail assets.

(c) Net carrying amount of investment properties in development valued at cost.

(d)            Market value (including transfer taxes) of shares in equity affiliates holding investments and other Business Property assets.

(e)            Including Residential and Business Property (offices and Logistics).

Credit ratios

At 30 June 2024, the Net Debt to EBITDA⁽³⁴⁾ ratio stood at 6.7x, compared with 6.6x at 31 December 2023.

The Net Debt/Net Debt + Equity ratio was 37.6% (compared to 33.8% at 31 December 2023).

Neither of these two ratios constitutes a bank covenant for the Group.

The only two banking covenants included in all credit documentation are LTV and ICR.

(a)            LTV (Loan to Value) = Net bond and bank debt/Restated value of assets including transfer duties.

(b)            ICR (Interest Coverage Ratio) = Operating income /Net borrowing costs (column “Funds from operations”).

At 30 June 2024, the financial position of the Group largely satisfied all of the covenants of its various credit contracts.

1.4.3.5 DEBT RATING

On 24 May 2024, S&P Global reiterated Altarea's BBB- investment grade rating, but lowered its outlook from "stable" to "negative", mainly due to the market environment. The linked rating of its development subsidiary

Altareit was also confirmed.                                                                 

(34) Net bond and bank debt/12-month rolling FFO operating income.

Consolidated income statement by segment

Consolidated balance sheet                                            

2    CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

CONTENTS

1         FINANCIAL STATEMENTS .................................................................................................. 24

2         NOTES - CONSOLIDATED INCOME STATEMENT BY SEGMENT ..................................... 29

3         OTHER INFORMATION ATTACHED TO THE INTERIM CONSOLIDATED FINANCIAL

STATEMENTS ....................................................................................................................... 30

1 Financial statements

Consolidated balance sheet

Statement of consolidated comprehensive income

Share in earnings of equity-method affiliates                                                                         4.5                 (3.2)              (68.8)                (7.7)

Corporate income tax                                                                                                             5.3                    1.0              114.4                21.5

 .

Other comprehensive income

Consolidated cash flows statement

(1)     Proceeds on disposals included in the calculation of net cash flow are presented net of transaction costs. Likewise, disposals of property assets are presented net of transaction costs in the cash flow from investment activities.

(2)     Capital increase related to the Employee Savings Fund (FCPE) and scrip dividend option as of 31 December 2023.

(3)     Dilution of the share capital of Alta Convictions, entry of subscribers.

Changes in consolidated equity

Others                                                                                                                                                        –                      –                        –                   (0.2)                        (0.2)                             (0.0)                     (0.2)

The notes constitute an integral part of the consolidated financial statements. 

2 Notes – Consolidated income statement by segment