Société Foncière Lyonnaise: Rapport Financier Intermédiaire – 30 juin 2020


31/07/2020 | 05h11 HAE

RAPPORT FINANCIER SEMESTRIEL

Six mois clos le 30 juin 2020

1

APERÇU

1.

Rapport de gestion intermédiaire

Page 3

2.

Facteurs de risque

Page 8

3.

États financiers consolidés

pour le semestre clos le 30 juin 2020

Page 16

4.

Rapport d'examen des commissaires aux comptes

Piste 48

5.

Déclaration de la personne responsable

Piste 51

pour le rapport financier intermédiaire

2

1. RAPPORT DE GESTION INTERMÉDIAIRE

Au 30 juin 2020, la composition du conseil d'administration de SFL était la suivante:

Président:

  • Juan José Brugera Clavero

Directeurs:

  • Pere Viñolas Serra (Vice-président)
  • Ali Bin Jassim Al Thani
  • Anges Arderiu Ibars
  • Jean-JacquesDuchamp
  • Carlos Fernandez-Lerga Garralda
  • Carmina Ganyet et Cirera
  • Carlos Krohmer
  • Arielle Malard de Rothschild
  • Luis Maluquer Trepat
  • Nuria Oferil Coll
  • Alexandra Rocca
  • Anthony Wyand

Lors de sa réunion du 28 juillet 2020, le Conseil d'administration a décidé de nommer Najat Aasqui en qualité d'administrateur en remplacement de Chantal du Rivau qui a démissionné du Conseil le 30 juin 2020.

—————————-

Les comptes consolidés semestriels du semestre clos le 30 juin 2020 ont été arrêtés par le conseil d'administration de la Société Foncière Lyonnaise du 28 juillet 2020, lors de sa réunion présidée par Juan José Brugera Clavero.

Dans un marché bouleversé par la crise du Covid-19, les revenus locatifs et les résultats EPRA ont baissé mais la valeur d'expertise du portefeuille a continué d'augmenter et la valeur liquidative du Groupe est restée stable, témoignant de la résilience stratégique de SFL.

Les auditeurs ont terminé leur examen des états financiers et ont publié leur rapport sur les informations financières intermédiaires, qui ne contient aucune réserve ni aucun accent sur le sujet.

Données consolidées (en millions d'euros)

1er semestre 2020

1er semestre 2019

Changement

Revenus locatifs

91,2

97,9

-6,9%

Résultat opérationnel ajusté *

74,8

83,3

-10,1%

Résultats EPRA

50,1

57,2

-12,5%

Bénéfice net attribuable

113,7

253,5

* Résultat opérationnel avant gains et pertes de cession et ajustements de juste valeur

30/06/2020

31/12/2019

Changement

Capitaux propres attribuables

4 473

4 485

-0,3%

Valeur du portefeuille consolidé hors frais de transfert

7 239

7 158

+ 1,1%

Valeur du portefeuille consolidée, frais de transfert compris

7 715

7 632

+ 1,1%

EPRA NNNAV

4 452

4 461

-0,2%

EPRA NNNAV par action

95,7 €

95,9 €

3

Résultats

Revenus locatifs

Les revenus locatifs consolidés du premier semestre 2020 s'élèvent à 91,2 millions d'euros, en baisse de 6,7 millions d'euros (6,9%) par rapport aux 97,9 millions d'euros publiés pour la même période de 2019.

  • Sur un à périmètre constant (hors variations de périmètre affectant les comparaisons périodiques), les loyers se contractent de 2,6 millions d'euros (2,9%). La baisse est due aux effets de la crise Covid-19, qui a conduit à l'octroi de congés de location aux locataires de petits commerces (avec un impact global marginal) et à la fermeture des centres de conférence Edouard VII et # cloud.paris également. comme l'hôtel Indigo. Corrigés des impacts des fermetures du centre de congrès, de l'hôtel Indigo et du parking Edouard VII, les revenus locatifs à périmètre constant progressent de 0,3 M €.
  • Les revenus locatifs des unités en réaménagement ou en rénovation sur les périodes concernées sont en baisse de 3,5 millions d'euros, du fait de la rénovation de plusieurs étages libérés fin 2019 et début 2020, principalement dans l'immeuble 103 Grenelle.
  • Enfin, les revenus des différentes pénalités sont en légère baisse de 0,6 M € premier semestre 2020.

Le résultat opérationnel avant gains et pertes de cession et ajustements de juste valeur des immeubles de placement s'élève à 74,8 millions d'euros au premier semestre 2020 contre 83,3 millions d'euros un an plus tôt.

Valeur d'évaluation du portefeuille

La valeur d'expertise du portefeuille au 30 juin 2020 est en hausse de 1,1% à périmètre constant par rapport au 31 décembre 2019. Les ajustements de juste valeur positifs des immeubles de placement s'élèvent à 42,8 millions d'euros au 30 juin 2020 contre des ajustements positifs de 234,5 millions d'euros à 30 juin 2019.

Bénéfice net

Les charges financières nettes s'élèvent à 13,7 millions d'euros au premier semestre 2020 contre 15,2 millions d'euros un an plus tôt, soit une diminution de 1,5 million d'euros. L'augmentation de 0,4 million d'euros des charges financières récurrentes, reflétant principalement la hausse du niveau d'endettement du Groupe, a été partiellement compensée par la baisse du coût moyen de la dette.

Après prise en compte de ces éléments clés, le Groupe a publié un résultat EPRA de 50,1 millions d'euros au premier semestre 2020, en baisse de 12,5% par rapport à 57,2 millions d'euros un an plus tôt. Le résultat net attribuable de la période s'établit à 113,7 millions d'euros contre 253,5 millions d'euros au premier semestre 2019.

Rapport d'activité

Opérations de location

Malgré la crise de Covid-19 qui a fortement perturbé le marché locatif francilien, SFL a signé des baux sur environ 16 000 m². au premier semestre 2020 dans de très bonnes conditions. Les 10 000 m2 des bureaux loués au cours de la période comprennent plus de 80% (6 500 m²) des surfaces de bureaux de l'immeuble 83 Marceau en cours de réaménagement, loué à Goldman Sachs dans le cadre d'un bail clé en main.

Les nouveaux baux de bureaux ont été signés pour un loyer nominal moyen de 867 € / m², correspondant à un loyer effectif de 754 € / m². Ces prix témoignent de la résilience du marché locatif parisien et de la très haute qualité des biens immobiliers du Groupe.

Le taux d'occupation physique des immeubles générateurs de revenus s'établit à 95,0% au 30 juin 2020 contre 97,4% au 31 décembre 2019. Les logements vacants restants sont situés principalement dans l'immeuble Le Vaisseau à Issy-les-Moulineaux et l'immeuble 103 Grenelle où environ 6000 m2 des bureaux récemment rénovés viennent d'être livrés. Le taux de vacance EPRA est de 4,5% au 30 juin 2020 contre 1,6% au 31 décembre 2019.

Opérations de développement

Les immeubles en développement au 30 juin 2020 représentaient environ 17% du portefeuille total. Il s'agit principalement des trois projets phares en cours du Groupe concernant:

4

  • L'espace commercial du Louvre Immeuble Saint-Honoré, dont la livraison est prévue fin 2023 dans le cadre d'un bail clé en main sur plus de 20 000 m². Les travaux de dégagement de l'espace à réaménager et de désamiantage viennent de commencer.
  • Le complexe de bureaux Biome de l'avenue Emile Zola (environ 24 000 m²), en cours de réaménagement complet. La phase de démolition partielle est déjà terminée et le bâtiment devrait être livré en 2022.
  • L'immeuble de bureaux du 83 avenue Marceau (environ 9 000 m²), en cours de réaménagement, avec livraison prévue en 2021. La plupart des logements ont été pré-loué, dont près de 6 500 m². (81% de la surface totale du bâtiment) loué dans le cadre d'un bail clé en main signé au premier semestre 2020.

Les frais de développement immobilisés au premier semestre 2020 s'élèvent à 32,5 millions d'euros, y compris les projets ci-dessus pour un total de 18,4 millions d'euros et les rénovations de grande ampleur d'étages complets des immeubles Washington Plaza, 103 Grenelle et 106 haussmann.

Les travaux sur ces projets ont été interrompus pendant environ deux mois pendant le verrouillage de Covid-19. Une fois le verrouillage levé, les différentes équipes ont progressivement repris le travail dans la mesure où les conditions le permettaient et l'activité du site a presque retrouvé son niveau normal en juin. Les délais de livraison qui en résultent ont été limités à un délai raisonnable de trois à six mois selon le projet.

Opérations de portefeuille

Aucun bien immobilier n'a été acheté ou vendu au premier semestre 2020.

Financement

Au cours de la période, SFL a émis pour 500 millions d'euros d'obligations à 7 ans à 1,50% échéant le 5 juin 2027.

Par ailleurs, une nouvelle ligne de crédit revolving de 150 millions d'euros sur cinq ans a été obtenue auprès de BNP Paribas. Cette nouvelle facilité annule et remplace une précédente ligne de crédit renouvelable de 150 millions d'euros qui avait été réduite à 100 millions d'euros en 2019 et devait expirer en mai 2021.

L'émission d'obligations et la marge de crédit renouvelable seront utilisées à des fins générales de l'entreprise. Ils ont prolongé la maturité moyenne de la dette du Groupe dans le cadre de sa stratégie de gestion proactive du bilan.

La dette nette au 30 juin 2020 s'élève à 1 877 millions d'euros (contre 1 732 millions d'euros au 31 décembre 2019), soit un ratio prêts / valeur de 24,3%. Au 30 juin 2020, le coût moyen de la dette après couverture est de 1,5% et la maturité moyenne est de 4,7 ans. A la même date, le ratio de couverture des intérêts s'établissait à 5,6x.

Au 30 juin 2020, SFL dispose de 1040 millions d'euros de lignes de crédit non tirées.

EPRA NNNAV

La valeur de marché consolidée du portefeuille au 30 juin 2020 s'établit à 7239 millions d'euros hors frais de transfert, soit une augmentation de 1,1% par rapport à 7158 millions d'euros au 31 décembre 2019 principalement due à la valeur créée par les travaux sur les projets phares du Groupe. La valeur de marché de ses immeubles de bureaux générateurs de revenus est stable par rapport à fin 2019.

Le rendement initial net (NIY) de l'EPRA recomposé moyen s'établit à 3,0% au 30 juin 2020, inchangé par rapport au 31 décembre 2019.

EPRA NNNAV s'établit à 4452 millions d'euros soit 95,7 euros par action au 30 juin 2020 contre 95,9 euros par action au 31 décembre 2019, reflétant une très faible baisse de 0,2% sur les six derniers mois après le versement d'un dividende de 2,65 euros par action en avril 2020. Après avoir rajouté le versement du dividende, EPRA NNNAV est en hausse de 2,6% sur la période.

5

Gestion de la crise sanitaire du Covid-19

Dès l'apparition de la crise, SFL a pris toutes les mesures nécessaires pour limiter les effets de la pandémie sur son activité et ses résultats:

  • Tous les immeubles de bureaux sont restés ouverts et accessibles aux locataires, et les mesures de protection sanitaire nécessaires ont été déployées dans les parties communes des immeubles.
  • Les centres de conférence (Edouard VII et # cloud.paris) et l'hôtel Indigo (Edouard VII) ont été fermés.
  • Des mesures gouvernementales concernant les très petites entreprises et les petits commerces de détail ont été appliquées et les demandes d'aide des locataires ont été gérées au cas par cas afin de leur apporter dans la mesure du possible le soutien nécessaire, par exemple en leur permettant de différer le paiement de leur loyer du deuxième trimestre.
  • Les activités de crédit-bail immobilier se sont poursuivies dans un marché locatif très lent.
  • Des accords ont été signés avec les entrepreneurs généraux intervenant sur les principaux projets de réaménagement en cours.
  • La liquidité financière du Groupe a été renforcée.

Du fait de ces mesures, l'impact de la crise a été limité à 3,7 millions d'euros de revenus locatifs «perdus», entraînant une réduction de 2,5 millions d'euros des loyers nets.

Une approche citoyenne

Pour assurer la continuité des affaires tout en protégeant les salariés, toutes les équipes de SFL ont travaillé à domicile pendant le lock-out, sans licenciements temporaires Depuis la levée du lock-out, elles sont progressivement retournées au bureau.

Enfin, SFL a contribué à l'effort collectif de lutte contre la pandémie, en reversant 550 000 € aux programmes de la Fondation de France en faveur des hôpitaux et des agents de santé, de la recherche médicale et de l'aide aux personnes vulnérables. Le Groupe a également proposé de mettre l'un de ses immeubles vacants à la disposition du ministère de la Ville de Paris pour y proposer des logements d'urgence.

Indicateurs EPRA

1er semestre 2020

1er semestre 2019

Résultat EPRA (en millions d'euros)

50,1

57,2

/partager

1,08 €

1,23 €

Ratio de coût EPRA (y compris les coûts de vacance)

16,1%

13,2%

EPRA Cost Ratio (hors frais de vacance)

14,3%

12,5%

30/06/2020

31/12/2019

VNI EPRA (en millions d'euros)

4 606

4 623

/partager

99,0 €

99,4 €

EPRA NNNAV (en millions d'euros)

4 452

4 461

/partager

95,7 €

95,9 €

Rendement initial net EPRA (NIY)

2,6%

2,7%

EPRA complété NIY

3,0%

3,0%

Taux de vacance EPRA

4,5%

1,6%

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Indicateurs de performance alternatifs (API)

Revenus de l'API EPRA

En millions d'euros

1er semestre 2020

1er semestre 2019

Bénéfice net attribuable

113,7

253,5

Moins:

Bénéfice (perte) sur cessions d'actifs

Ajustements de juste valeur des immeubles de placement

(42,8)

(234,5)

Ajustements de juste valeur des instruments financiers, actualisation

0,2

2,1

ajustements de la dette et des coûts connexes

Taxe sur les articles ci-dessus

(9,0)

12,5

Intérêts minoritaires dans les éléments ci-dessus

(12,0)

23,6

Résultats EPRA

50,1

57,2

API EPRA NNNAV

En millions d'euros

30/06/2020

31/12/2019

Capitaux propres attribuables

4 473

4 485

Actions propres

4

8

Gains en capital non réalisés

23

23

Ajustements de juste valeur de la dette à taux fixe

(48)

(55)

EPRA NNNAV

4 452

4 461

Dette nette API

En millions d'euros

30/06/2020

31/12/2019

Emprunts à long terme et instruments dérivés

1 936

1 441

Emprunts à court terme et autres dettes portant intérêt

258

393

Dette dans l'état consolidé de la situation financière

2 194

1 834

Moins:

Avances en compte courant (passifs)

(50)

(50)

Intérêts courus, comptabilisation différée des frais de dossier,

2

1

ajustements négatifs de la juste valeur des instruments financiers

(54)

Trésorerie et équivalents de trésorerie

(270)

Dette nette

1 877

1 732

7

2. FACTEURS DE RISQUE

Cette section présente les expositions aux risques spécifiques qui pourraient avoir un effet défavorable important sur la société, ses activités, sa situation financière, ses résultats, ses perspectives ou sa capacité à atteindre ses objectifs.

Les facteurs de risque sont présentés dans différentes catégories. Au sein de chaque catégorie, les risques sont présentés par ordre d'importance décroissante en fonction de la probabilité d'occurrence (élevée ou modérée) et de l'ampleur estimée de leur effet indésirable, telle qu'évaluée par la Société à la date du présent rapport.

Les politiques de gestion des risques du Groupe ont été prises en compte dans l'évaluation de ces risques.

Les catégories de risque sont les suivantes:

  1. RISQUES SPÉCIFIQUES AU SECTEUR IMMOBILIER
  2. SPÉCIFIQUE AU SECTEURRISQUES OPÉRATIONNELS
  3. RISQUES JURIDIQUES ET FISCAUX ASSOCIÉS À L'ACTIVITÉ IMMOBILIÈRE
  4. RISQUES FINANCIERS ASSOCIÉS À L'ACTIVITÉ IMMOBILIÈRE
  5. RISQUES FINANCIERS LIÉS AUX EFFETS DU CHANGEMENT CLIMATIQUE

Les facteurs de risque sont discutés sur pages 14 à 19 du Document d'enregistrement universel 2019 contenu dans le Rapport annuel 2019 déposé auprès du Autorité des marchés financiers (AMF) le 13 mars 2020.

Dans le prospectus obligataire approuvé par l'AMF le 3 juin 2020, la description des facteurs de risque suivants a été modifiée, principalement en raison de la pandémie Covid-19:

A.1) Risques liés au cycle de propriété

A.3) Risques de resserrement du crédit

B.5) Risque d'insolvabilité des locataires, corrélé à la croissance économique et aux niveaux d'inflation et de consommation

D.13) Risque de liquidité

D.14) Risque de contrepartie

D.15) Risque de taux d'intérêt

Les modifications sont reproduites dans ce rapport.

Il est difficile, à ce stade, d'évaluer les effets directs et indirects de la crise du Covid-19 sur l'activité et les résultats de la Société, bien qu'ils semblent actuellement limités, en raison de la nature de l'activité de la Société et du fait que son actif Le portefeuille se compose d'immeubles de bureaux presque entièrement loués.

Le bilan solide et le positionnement stratégique de SFL sur le marché de l'immobilier de bureaux de premier ordre représentent des atouts majeurs dans l'environnement actuel. Cependant, la durée incertaine et la gravité future de la pandémie de Covid-19 pourraient conduire à une augmentation du niveau de risque associé à l'environnement commercial de la Société et avoir un effet défavorable important sur ses activités, sa situation financière, ses résultats ou ses perspectives.

En réponse à la situation, la Société a mis en place un processus permettant d'évaluer régulièrement les impacts de l'épidémie de coronavirus.

Un comité spécial de suivi et de gestion a été mis en place, composé de membres de la direction générale et des responsables des unités opérationnelles, et des mesures ont été déployées pour gérer les effets de l'épidémie sur la continuité des activités et l'utilisation continue des actifs de la Société.

Les investisseurs doivent garder à l'esprit que ce qui suit ne prétend pas être une description complète de tous les risques et incertitudes auxquels la Société est confrontée. D'une part, la Société est exposée à des risques généraux communs à toutes les activités et non spécifiques à SFL. En plus de cela, d'autres risques ou incertitudes inconnus, ou risques ou incertitudes dont la survenance n'est pas considérée, à la date du présent rapport, comme susceptible d'avoir un effet défavorable important sur la Société, peuvent exister ou pourraient devenir des facteurs importants pouvant avoir un effet défavorable important sur la société.

8

A. RISQUES SPÉCIFIQUES AU SECTEUR IMMOBILIER

Facteurs de risque

Mesures de prévention / d'atténuation des risques

Risque élevé

1) Risques liés au cycle immobilier

Nous sommes exposés au risque d'un retournement cyclique du marché de la location et / ou de l'investissement déclenché par un retournement de situation économique et financière nationale et mondiale. Le marché parisien de l'immobilier de bureaux est cyclique et les prix dépendent de l'équilibre entre l'offre de bureaux et la demande des investisseurs.

Au 31 décembre 2019, une augmentation de 25 pb du rendement de sortie combinée à une augmentation de 25 pb du taux d'actualisation aurait pour effet de réduire la valeur d'expertise du portefeuille de 8%, tandis qu'une baisse de 25 pb du rendement de sortie combiné une baisse de 25 points de base du taux d'actualisation aurait pour effet d'augmenter la valeur d'expertise du portefeuille de 9%.

Voir la note IV-4 de l'annexe aux comptes consolidés intermédiaires (Immeubles de placement), pages 28 et 29 du présent rapport, pour plus d'informations sur les paramètres utilisés pour évaluer les immeubles de placement dans chaque classe d'actifs.

La crise de santé publique du Covid-19 en France et dans le monde perturbe le secteur immobilier. Cependant, il n'est actuellement pas possible de quantifier l'impact financier de la crise sur l'activité et les résultats de SFL en 2020.

La Société n'est en grande partie pas affectée par la décision du gouvernement d'autoriser les très petites entreprises à reporter leurs loyers, en raison de son positionnement stratégique sur le segment prime du marché parisien de l'immobilier de bureaux, ce qui signifie que cette catégorie de locataires représente moins de 2% des Revenus locatifs annuels du Groupe. Les quelques demandes reçues des locataires sont analysées au cas par cas et le Groupe s'efforce de les accompagner dans la mesure du possible dans cette période difficile.

Le marché locatif a également ralenti, sans s'arrêter complètement; cependant, SFL n'est en grande partie pas touchée parce qu'elle a très peu d'unités vacantes immédiatement disponibles à la location.

Effets indésirables:

  • Revenus locatifs inférieurs
  • Baisse des valeurs du portefeuille
  • Occasions perdues d'acheter et de vendre des propriétés
  • Baisse du résultat opérationnel
  • Érosion de la valeur liquidative
  • Le risque de retournement cyclique du marché est mesuré et pris en compte en réalisant des tests de sensibilité pour déterminer l'impact d'une augmentation / diminution de 25 pb des rendements de sortie et des taux d'actualisation.
  • Un système de suivi du marché immobilier a été mis en place.
  • Les conseillers sont régulièrement consultés, les développements sont suivis de près et des études internes et externes sont commandées.
  • Le positionnement stratégique du Groupe sur le segment prime du marché de l'immobilier de bureaux représente un facteur d'atténuation des risques.

2) Risques de valorisation des actifs

En conséquence directe des tendances du marché immobilier, la Société est exposée au risque d'une baisse de valeur de ses actifs qui affecterait directement le résultat consolidé et la valeur liquidative.

Effets indésirables:

  • sur les comptes consolidés
  • sur le compte de résultat
  • sur NAV
  • Tous les actifs immobiliers du Groupe sont évalués par des experts indépendants qualifiés.
  • Les évaluations sont effectuées conformément aux Charte d'Expertise en Evaluation Immobilière (charte d'évaluation immobilière) et se conformer aux normes édictées par la
    European Group of Valuers 'Associations (TEGoVA) ainsi qu'avec les normes de la Royal Institution of Chartered Surveyors (RICS).
    • Les évaluations sont réalisées par deux experts (Cushman & Wakefield: 55%, CBRE: 45%).

(Voir également Note IV-4 de l'annexe aux comptes consolidés semestriels (Immeubles de placement), pages 28 et 29 du présent rapport)

3) Risque de resserrement du crédit

Nous sommes exposés au risque qu'une hausse des taux d'intérêt plus rapide que prévu puisse déstabiliser les marchés financiers, faire grimper les coûts d'emprunt et rendre potentiellement difficile l'accès au financement bancaire. Les exploitants d'entreprises immobilières ont besoin d'un accès régulier au financement bancaire.

Voir Note VI-1) de l'annexe aux comptes consolidés semestriels (Emprunts et autres dettes portant intérêt), pages 34 et 35 du présent rapport, pour plus d'informations sur les emprunts, les covenants et les clauses d'accélération.

Voir également le paragraphe 3 / Risque de marché de la note VI-4 de l'annexe aux comptes consolidés semestriels (Objectifs et politique de gestion des risques financiers), pages 37 et 38 de ce rapport, pour plus d'informations sur la sensibilité aux variations de taux d'intérêt.

Effets indésirables:

  • Capacité limitée d'acheter de nouveaux actifs
  • Capacité limitée de réaménager les actifs
  • Difficultés de refinancement de la dette existante
  • Augmentation des coûts financiers
  • Érosion de la valeur liquidative
  • Des prévisions de trésorerie régulières sont préparées.
  • L'encours de la dette et la capacité d'emprunt disponible au titre de nos marges de crédit sont surveillés.
  • Nos cotes de crédit sont surveillées.
  • Des fonds peuvent être levés en vendant des actifs, bien que cette source alternative de financement soit également soumise aux risques de marché (risque de prix, risque de liquidité de marché). En outre, les ventes d'actifs effectuées lorsque les prix sont déprimés et dans un contexte de pénurie d'acheteurs potentiels, ou avant que leur plein potentiel de réversion ne soit atteint, entraîneraient des pertes d'opportunités.

Risque modéré

4) Risques liés à un environnement hautement concurrentiel

Nous sommes exposés à la concurrence des investisseurs avec

capitaux propres considérables, tels que les assureurs, SCPI et OCPI

Notre activité est stratégiquement concentrée sur un marché de premier ordre

fonds immobiliers et fonds souverains, et d'autres

segment.

investisseurs avec des niveaux d'endettement et d'endettement assez modérés.

Nous avons mis en place un suivi du secteur de haute qualité

Effets indésirables:

système.

Incapacité d'acquérir des actifs

Revenus locatifs inférieurs

Nous avons une capacité de financement sans engagement.

Baisse du résultat opérationnel

Érosion de la valeur liquidative

dix

RISQUES OPÉRATIONNELS SPÉCIFIQUES AU SECTEUR

C.

Facteurs de risque

Mesures de prévention / d'atténuation des risques

Risque élevé

  1. Risque d'insolvabilité des locataires, corrélé à la croissance économique et aux niveaux d'inflation et de consommation

Nous sommes exposés au risque de défaillance des locataires et d'arriérés de loyers, de non-renouvellement de baux et de renouvellements de baux à des conditions moins favorables, notamment en cas de retournement cyclique des marchés.

Au 30 juin 2020, le taux d'occupation physique des immeubles générateurs de revenus est de 95,0% et le taux de vacance EPRA de 4,5%. Pour les propriétés du portefeuille, la période moyenne jusqu'à la prochaine date de sortie potentielle était de 5,3 ans et la période moyenne avant l'expiration des baux était de 6,5 ans. Les bureaux représentent 79% des revenus locatifs et les commerces 20%.

Voir Note V-3) de l'annexe aux comptes consolidés semestriels (Clients et autres créances), page 32 du présent rapport, pour plus d'informations sur les provisions pour dépréciation des créances commerciales constituées au premier semestre 2020.

Compte tenu de l'effet de la crise du Covid-19 et du blocage imposé entre le 17 mars et le 11 mai, le marché locatif devrait connaître des perturbations dans les mois à venir. Le niveau de perturbation variera fortement en fonction du segment de marché (points de vente locaux, grands centres commerciaux, bureaux dans les quartiers d'affaires centraux, etc.). S'il est encore trop tôt pour estimer les effets opérationnels et financiers à court et moyen terme de la crise, le positionnement stratégique de SFL l'aidera à résister à cette période. Les TPE, les plus durement touchées par la crise, représentent moins de 2% des revenus locatifs annuels du Groupe. Les défauts de paiement des loyers étaient assez faibles au deuxième trimestre par rapport au total des loyers. Par ailleurs, le Groupe dispose de très peu de logements vacants immédiatement disponibles à la location ou qui deviendront disponibles avant la fin de l'année. Moins de 2% des baux seront renouvelés au second semestre.

Effets indésirables:

  • Taux d'occupation physique inférieur
  • Revenus locatifs inférieurs
  • Baisse du résultat opérationnel

6) Risque d'obsolescence et de dépréciation d'actifs

Nous sommes exposés à des risques liés à la sensibilité des actifs aux changements des normes environnementales et réglementaires et aux questions de RSE.

Effets indésirables:

  • Perte d'attractivité pour les locataires
  • Augmentation des primes d'assurance, des coûts d'exploitation et des coûts de construction
  • Érosion de la valeur liquidative
  • L'érosion de l'image et de la réputation de SFL
  • Diversification des locataires: au 31 décembre 2019, les dix premiers locataires du Groupe représentaient environ 39,3% du total des revenus locatifs et les cinq premiers environ 24,0%.
  • La base de locataires comprend des entreprises opérant dans une grande variété de secteurs tels que les services financiers, l'immobilier, le conseil, l'assurance, la mode et les produits de luxe, ainsi que des cabinets d'avocats et des organisations internationales.
  • Les nouveaux locataires sont soumis à des vérifications de crédit avant la signature du bail et tous les nouveaux locataires sont tenus de payer une caution de loyer.
  • Semestrieldes bilans de santé financière sont effectués pour les locataires ayant des arriérés de loyer en fin de période.
  • Les dates d'expiration des baux et les taux de vacance EPRA sont suivis de près.
  • Un système est en place pour nous permettre d'anticiper les renouvellements de baux (par exemple, pour approcher les locataires en vue de renégocier le loyer ou planifier des travaux de rénovation).
  • Les arriérés de loyer sont étroitement surveillés.
  • Une attention particulière est portée à la planification des travaux de rénovation et de réaménagement des actifs et à la valorisation des actifs par l'ajout de nouveaux services.
  • Les enjeux RSE sont profondément ancrés dans la stratégie immobilière de l'entreprise:
    • Le Comité RSE se réunit deux fois par an pour définir les grands objectifs stratégiques de chaque enjeu RSE.

  • Des procédures sont effectuées pour garantir que le
    La performance RSE de l'entreprise reflète les meilleures pratiques de l'industrie et est reconnue par les évaluateurs immobiliers.
  • SFL se conforme également aux recommandations de l'EPRA pour son reporting RSE.
  • Pour mieux comprendre les attentes des clients et du marché, SFL a mené deux enquêtes auprès des utilisateurs de ses bâtiments en 2017 et 2018, et en 2019, une
    Enquête ParisWorkPlace auprès de 2000 cadres de la région parisienne sur leurs habitudes et leurs attentes en matière de bureaux, afin de réaliser des comparaisons sur une population plus large et encore très représentative des personnes travaillant dans les immeubles de SFL.

(Voir le document d'information non financière – NFIS à la page 36 et suiv. du Document d'Enregistrement Universel 2019 pour plus de détails)

Risque modéré

7) Risques associés à la perte de personnel clé

Nous sommes exposés au risque de perdre des compétences essentielles à la mission si la direction, les membres du comité de direction et / ou les principaux dirigeants quittent l'entreprise.

Effets indésirables:

  • Baisse des bénéfices
  • Perte de confiance des investisseurs
  • L'érosion de l'image et de la réputation de SFL
  • Notre politique de rémunération vise à fidéliser les principaux dirigeants.
  1. Risques associés aux sous-traitants et autres prestataires de services

Nous faisons largement appel à des sous-traitants et à d'autres prestataires de services:

  • Pour les grands projets de réaménagement et de rénovation, et
  • Pour le entretien quotidien de nos propriétés.

Notre dépendance vis-à-vis de prestataires extérieurs pour mener à bien les projets dans les délais est aggravée par le fait qu'il existe relativement peu d'entreprises de construction ayant la capacité de réaliser d'importants travaux de rénovation ou de réaménagement immobilier à Paris.

Il existe un risque que les entrepreneurs ne respectent pas leurs engagements ou exécutent des travaux de qualité inférieure.

Effets indésirables:

  • Retards dans la réalisation des projets, dépassements de budget, retards dans la remise des biens sur le marché locatif
  • Interruption du processus de conformité du cautionnement de bonne exécution
  • Baisse du résultat opérationnel
  • L'érosion de l'image et de la réputation de SFL
  • Les sous-traitants et prestataires de services sont sélectionnés dans le cadre d'un appel d'offres.
  • Nous appliquons une politique de diversification des entrepreneurs.
  • La qualité des services des entrepreneurs est étroitement surveillée.

  1. RISQUES JURIDIQUES ET FISCAUX ASSOCIÉS À L'ACTIVITÉ IMMOBILIÈRE

Facteurs de risque

Mesures de prévention / d'atténuation des risques

Risque modéré

9) Risques généraux de conformité réglementaire

Nous sommes soumis à une réglementation très détaillée et en constante évolution, couvrant les opérations de construction, les baux commerciaux, les permis administratifs, la sécurité, l'environnement et les questions de santé publique.

Les coûts de mise en conformité sont très élevés.

Nous sommes exposés à des risques de responsabilité civile et pénale en cas de non-respect de la réglementation (notamment pour dommages environnementaux ou incidents de santé publique, ou mise en danger imprudente).

Il existe un risque que les locataires ne se conforment pas strictement à toutes les réglementations applicables en matière d'environnement, de santé et de sécurité.

Effets indésirables:

  • Détérioration des bénéfices, des marges, des perspectives de croissance et de développement
  • L'érosion de l'image et de la réputation de SFL
  • Nous avons le juridique et technique compétences nécessaires pour gérer ces risques:
    • Un service juridique spécialisé est chargé de suivre les évolutions réglementaires et de veiller au respect des différentes réglementations applicables à notre activité.
    • Nous utilisons également les services de conseillers et consultants externes si nécessaire.
    • Des procédures internes ont été mises en place pour élever le niveau de responsabilité des différentes personnes impliquées.
    • Une cellule technique a été mise en place avec une responsabilité spécifique pour le respect de l'environnement, de la santé et de la sécurité.

10) Risques associés aux procédures gouvernementales

Pour la plupart des projets de rénovation à grande échelle, des permis de construction et / ou autres doivent être obtenus auprès des autorités municipales compétentes, y compris parfois des autorisations de propriété commerciale de la CDAC ou des permis d'amélioration des commissions locales qui surveillent le respect des réglementations en matière de santé et de sécurité dans les bâtiments ouverts à tous. le public.

Il existe un risque de retards importants dans l'obtention de ces permis et autres autorisations, ou des plans devant être modifiés avant l'octroi du permis.

Une fois les permis obtenus, il existe toujours un risque que des tiers soulèvent des objections. Cela peut retarder davantage le projet et, dans certains cas, il peut être nécessaire d'ajuster les plans.

Effets indésirables:

  • Retards de projets, dépassements de budget, projets abandonnés
  • Impossibilité d'utiliser certains actifs
  • Érosion de la performance commerciale, des résultats et de la situation financière de la société
  • Nous utilisons systématiquement les services de professionnels qualifiés pour préparer nos projets (architectes, ingénieurs-conseils, géomètres et consultants en commercialisation).
  • Nous soumettons des projets de demandes de permis aux autorités pour vérifier que tout est en ordre, avant de les déposer officiellement et avant de commencer les travaux.

11) Risques de plaintes des voisins

La plupart de nos propriétés sont situées dans des zones urbaines densément peuplées et nos grands projets de réaménagement engendrent des risques de désaménagements (bruit et / ou vibrations).

Les plaintes des voisins peuvent conduire à d'importantes demandes d'indemnisation ou même à des injonctions d'arrêt de travail.

Effets indésirables:

  • Retards de projets, dépassements de budget, projets abandonnés
  • Lors de la planification de travaux de démolition ou de travaux sur la structure d'un bâtiment, nous organisons systématiquement une expert désigné par le tribunal pour préparer un rapport sur l'état des propriétés voisines et sur les désagréments existants avant le début des travaux.
  • Tous les entrepreneurs sont tenus de prendre des mesures pour limiter les désagréments, principalement en gardant les espaces publics propres et en gérant la circulation, la poussière, le bruit et les vibrations.

  • Érosion des résultats et de la situation financière de la société

La pollution sonore et autres désagréments sont étroitement surveillés.

Tous les entrepreneurs sont désormais tenus de répondre aux critères de performance élevés ou très élevés des normes HQE françaises pour maintenir des chantiers «verts» avec une empreinte environnementale minimale.

12) Risques liés au statut SIIC

Nous sommes exposés au risque de perdre le bénéfice du régime fiscal SIIC en cas de non-respect des règles d'éligibilité.

Les conditions d'éligibilité au régime SIIC font l'objet d'un suivi régulier, notamment l'évolution de la position de l'administration fiscale et du précédent juridique (obligations de dividende, obligations concernant le niveau de contrôle exercé par l'actionnaire majoritaire, etc.).

D – RISQUES FINANCIERS ASSOCIÉS À L'ACTIVITÉ IMMOBILIÈRE

Facteurs de risque

Mesures de prévention / d'atténuation des risques

Risque modéré

13) Risque de liquidité

Les exploitants d'entreprises immobilières, en particulier ceux du segment des bureaux de premier ordre, doivent lever des fonds importants. Nous avons accès à des lignes de crédit confirmées mais celles-ci peuvent ne pas être suffisantes pour financer les investissements et les achats immobiliers, et pour remplacer la dette à l'échéance.

Au 30 juin 2020, SFL dispose de 1040 millions d'euros de lignes de crédit engagées non tirées.

See Note V1-1) to the interim consolidated financial statements (Borrowings and other interest-bearing debt), page 34 of this report, for more information about debt maturities.

Adverse effects:

  • Deterioration of our ability to raise funds and consequently to access the liquidity needed to conduct the business
  • Deterioration of the Company's cash position and profits

14) Counterparty risk

The banks that provide lines of credit and/or hedging instruments may fail to honour their commitments. The counterparty risk associated with hedging instruments is identified in the market value of the hedge.

See Note V1-1) to the interim consolidated financial statements (Borrowings and other interest-bearing debt), page 34 of this report, for more information about lines of credit and hedging instruments negotiated with banks.

Adverse effects:

  • Loss of the benefit of hedges
  • Deterioration of the Company's financial position and profits
  • The liquidity represented by backup facilities is sufficient to cover the Group's repayment obligations regarding its lines of credit up until July 2022.
  • We apply a policy of diversifying our sources of debt.
  • S&P rating: BBB+ stable outlook.
  • Our lines of credit and hedging instruments are arranged with eight leading banks.
  • Our minimal cash reserves are generally used to repay borrowings under the revolving lines of credit.

15) Interest rate risk

We are exposed to the risk of higher interest rates, and the consequential risk of being unable to raise the necessary financial resources to meet our working capital and investment needs.

Financial instruments exposed to interest rate risks include negotiable European commercial paper (NEU CP) and undrawn revolving lines of credit.

See paragraph 3/ Market risk in Note VI-4 to the interim consolidated financial statements (Financial risk management objectives and policy), page 37 of this report, for more information about interest rate risks and sensitivity to changes in interest rates.

Adverse effects:

  • Higher interest charges
  • Increased finance costs
  • Interest rate risks are prudently and actively managed using an information system that tracks changes in the financial markets and calculates the fair value of hedging instruments in real time. This allows us to efficiently quantify and analyse the risks associated with interest rate fluctuations.
  • Standard interest rate derivatives and fixed rate borrowings are used with the dual objective of reducing the sensitivity of borrowing costs to rising interest rates and minimising the cost of the derivatives. Our internal policy consists of hedging at least 70% of debt at all times. At 30 June 2020, 93% of debt was hedged (before taking into account three hedges on a total notional amount of €300 million that will come into effect between November 2021 and November 2022 for a period of five years).

E.16) Information about the financial risks linked to the effects of climate change and the measures taken by the Company to reduce these risks through a low-carbonstrategy applied across all business units is provided in the Non-FinancialInformation Statement (NFIS), page 36 et seq of the 2019 Universal Registration Document.

  1. CLAIMS AND LITIGATION

No governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the Company is aware) may have or have had significant effects on the Company's financial position or profitability during the last 12 months.

—————-

15

3. CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2020

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2020

A – Consolidated Statement of Financial Position

B – Consolidated Statement of Comprehensive Income

C – Consolidated Statement of Changes in Equity

D – Consolidated Statement of Cash Flows

E – Notes to the Interim Consolidated Financial Statements

I – Accounting Policies

  1. – Significant Events of the Period
    III – Segment Information
    IV – Intangible Assets, Property and Equipment, and Investment Property
    V – Operating Activities
    VI – Financing Activities
    VII – Equity and Earnings Per Share VIII – Provisions
    IX – Remuneration and Other Employee Benefits
    X – Income Taxes
    XI – Off-Balance Sheet Commitments XII – Note to the Statement of Cash Flows XIII – Scope of Consolidation

The interim consolidated financial statements were approved for publication by the Board of Directors on 28 July 2020.

A – Consolidated Statement of Financial Position

(in thousands of euros)

Remarques

30 June 2020

31 December 2019

LES ATOUTS

Section E

16

Immobilisations incorporelles

IV-1

1,025

532

Property and equipment

IV-2

20,688

20,325

Investment property

IV-4

7,124,671

7,045,049

Non-current financial assets

VI-5

1,375

8,225

Autres actifs non courants

V-4

30,432

8,233

Total non-current assets

7,178,191

7,082,364

Trade and other receivables

V-3

95,052

78,735

Other current assets

V-4

5,250

234

Trésorerie et équivalents de trésorerie

VI-6

270,028

54,002

Total current assets

370,330

132,971

Total des actifs

7,548,521

7,215,335

(in thousands of euros)

Remarques

30 June 2020

31 December 2019

EQUITY AND LIABILITIES

Section E

Share capital

93,058

93,058

Reserves

4,265,895

3,802,389

Bénéfice de la période

113,651

589,758

Equity attributable to owners of the parent

4,472,604

4,485,205

Non-controlling interests

536,804

551,770

Total non-controlling interests

536,804

551,770

Total equity

VII-1

5,009,408

5,036,975

Long-term borrowings and derivative instruments

VI-1

1,935,994

1,441,490

Long-term provisions

VIII-1

1,660

1,414

Deferred tax liabilities

X-3

214,410

221,571

Accrued taxes

X-1

5,169

5,142

Other non-current liabilities

V-6

26,850

26,870

Total non-current liabilities

2,184,083

1,696,487

Trade and other payables

V-5

40,938

26,196

Short-term borrowings and other interest-bearing debt

VI-1

258,012

392,814

Short-term provisions

VIII-1

967

1,123

Other current liabilities

V-6

55,113

61,740

Total des passifs courants

355,030

481,873

Total equity and liabilities

7,548,521

7,215,335

17

B – Consolidated Statement of Comprehensive Income

(in thousands of euros)

Remarques

First-half 2020

First-half 2019

Section E

Rental income

91,190

97,909

Gross property expenses

(20,979)

(22,124)

Property expenses recovered from tenants

16,225

16,782

Property expenses, net of recoveries

(4,754)

(5,342)

Net property rentals

V-1

86,436

92,567

Other income

V-2

1,049

2,731

Depreciation, amortisation and impairment

IV-3

(486)

(487)

Provision expense, net

VIII-2

(793)

(67)

Employee benefits expense

IX-1

(6,556)

(6,597)

Other expenses

V-7

(4,831)

(4,881)

Profit/(loss) on disposal of other assets

(3)

Fair value adjustments to investment property

IV-4

42,806

234,466

Bénéfice d'exploitation

117,625

317,729

Finance costs and other financial expenses

VI-2

(16,115)

(15,775)

Financial income

VI-2

2,486

2,465

Fair value adjustments to financial instruments

VI-3

(dix)

(1,718)

Discounting adjustments to receivables and payables

(78)

(182)

Bénéfice avant impôt sur le revenu

103,908

302,519

Income tax benefit/(expense)

X-2-3

5,578

(17,152)

Bénéfice de la période

109,486

285,367

Attributable to owners of the parent

113,651

253,549

Attributable to non-controlling interests

VII-5

(4,165)

31,818

Earnings per share

VII-4

€2.45

€5.48

Diluted earnings per share

VII-4

€2.45

€5.47

Other comprehensive income

Actuarial gains and losses

VIII-1

(271)

(128)

Other items

Items that will not be reclassified to profit or loss

(271)

(128)

Valuation gains and losses on financial instruments

VI-3

(4,683)

(cash flow hedges)

Deferred tax impact of valuation gains and losses on financial

instruments

Items that may be reclassified subsequently to profit or loss

(4,683)

Other comprehensive income/(loss)

(4,954)

(128)

Comprehensive income

104,532

285,239

Attributable to owners of the parent

108,697

253,421

Attributable to non-controlling interests

(4,165)

31,818

18

C – Consolidated Statement of Changes in Equity

(in thousands of euros)

Partager

Share premium

Revaluation

Treasury shares

Cash flow

Autre

Profit for

Equity

Equity

capital

Compte

reserve

hedges

reserves

the period

attributable

attributable to

to owners

non-controlling

du

interests

parent

Equity

93,058

556,116

22,621

(18,317)

3,004,744

351,636

4,009,856

502,107

at 31 December 2018

Movements for the period

Bénéfice de la période

253,549

253,549

31,818

Other comprehensive income/(loss), net of tax

(128)

(128)

Comprehensive income

(128)

253,549

253,421

31,818

Appropriation of profit

351,636

(351,636)

Treasury share transactions

2,566

2,566

Gains and losses on sales of treasury shares

(2,403)

(2,403)

Share-based payments

1,147

1,147

Dividends paid to owners of the parent

(122,711)

(122,711)

(8,299)

Equity

93,058

556,116

22,621

(18,154)

3,234,688

253,549

4,141,874

525,627

at 30 June 2019

Movements for the period

Bénéfice de la période

336,209

336,209

26,144

Other comprehensive income/(loss), net of tax

5,697

71

5,768

Comprehensive income

5,697

71

336,209

341,977

26,144

Appropriation of profit

Treasury share transactions

208

208

Gains and losses on sales of treasury shares

dix

dix

Share-based payments

1,135

1,135

Dividends paid to owners of the parent

Equity

93,058

556,116

22,621

(17,936)

5,697

3,235,894

589,758

4,485,205

551,770

at 31 December 2019

Movements for the period

Bénéfice de la période

113,651

113,651

(4,165)

Other comprehensive income/(loss), net of tax

(4,683)

(271)

(4,954)

Comprehensive income

(4,683)

(271)

113,651

108,697

(4,165)

Appropriation of profit

589,758

(589,758)

Treasury share transactions

2,635

2,635

Gains and losses on sales of treasury shares

(2,643)

(2,643)

Share-based payments

1,538

1,538

Dividends paid to owners of the parent

(122,828)

(122,828)

(10,801)

Equity

93,058

556,116

22,621

(17,945)

1,014

3,704,091

113,651

4,472,604

536,804

at 30 June 2020

19

D – Consolidated Statement of Cash Flows

(in thousands of euros)

Remarques

First-half 2020

First-half 2019

Section E

Cash flows from operating activities

Profit for the period attributable to owners of the parent

113,651

253,549

Fair value adjustments to investment property

IV-4

(42,806)

(234,466)

Depreciation, amortisation and impairment

IV-3

486

487

Net additions to provisions

VIII-1

474

22

Net gains and losses from disposals of assets, after tax

3

Discounting adjustments and valuation losses on financial instruments

88

1,900

Deferral of rent-free periods and key money

V-1

(1,256)

1,551

Avantages sociaux

IX-3

1,538

1,147

Non-controlling interests in profit for the period

VII-5

(4,165)

31,818

Cash flow

68,010

56,011

after finance costs and income tax

Finance costs

VI-2

13,629

13,310

Impôt sur le revenu

X-2-3

(5,578)

17,152

Cash flow

76,061

86,473

before finance costs and income tax

Change in working capital

(13,556)

98

Interest paid

(10,904)

(11,172)

Interest received

32

46

Income tax paid

(7,107)

(7,345)

Net cash provided by (used by) operating activities

44,526

68,100

Cash flows from investing activities

Acquisitions of and improvements to investment property

XII

(50,269)

(23,896)

Acquisitions of intangible assets and property and equipment

(1,341)

(206)

Proceeds from disposals of investment property, intangible assets and

1

property and equipment

Other cash inflows and outflows

2,301

Net cash provided by (used by) investing activities

(49,309)

(24,101)

Cash flows from financing activities

Purchases and sales of treasury shares, net

(8)

163

Dividends paid to owners of the parent

VII-3

(122,828)

(122,711)

Dividends paid to non-controlling interests

(6,794)

Proceeds from new borrowings

1,464,601

915,687

Repayments of borrowings

(1,119,331)

(812,676)

Other movements in financing items

(1,625)

Net cash provided by (used by) financing activities

220,809

(26,331)

Net change in cash and cash equivalents

216,026

17,668

Cash and cash equivalents at beginning of period

54,002

25,304

Cash and cash equivalents at end of period

XII

270,028

42,972

Net change in cash and cash equivalents

216,026

17,668

Cash and cash equivalents in the statement of cash flows are stated net of bank overdrafts.

20

E – Notes to the Interim Consolidated Financial Statements

I – Accounting Policies

I – 1) Accounting standards

As required under European Commission regulation (EC) 16/06/2002 dated 19 July 2002, the interim consolidated financial statements of the SFL Group have been prepared in accordance with the International Accounting Standards (IASs), International Financial Reporting Standards (IFRSs) and related interpretations (SICs and IFRICs) adopted by the European Union.

The following standards and amendments published by the IASB and adopted by the European Union are effective for accounting periods ending 30 June 2020:

  • Amendments to IAS 1 & IAS 8 – Definition of Material. The IASB has published amendments to its definition of "material" to make it easier for management to exercise judgement when assessing materiality. Information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements.
  • Amendments to IFRS 9, IAS 39, IFRS 7 Interest Rate Benchmark Reform – Phase 1. These amendments are designed to facilitate financial reporting during the period of uncertainty arising from the reform of interest rate benchmarks such as interbank offered rates (IBORs) and the replacement of EURIBOR and EONIA with new benchmarks (hybrid EURIBOR, ESTER). In the first phase of the project, companies have been granted temporary relief from applying specific hedge accounting requirements to hedging relationships, so that hedge accounting can continue to be applied. This relief will last until the reform is published. IBOR reform and its potential effects are currently being examined by the Group.
  • Narrow scope amendments to IFRS 3 – Definition of a Business. These amendments are designed to help entities determine whether they have acquired a business or a group of assets for the purpose of applying IFRS 3 – Business Combinations. A business is defined as an integrated set of activities and assets that is capable of being conducted and managed for the purpose of providing goods or services to customers. If substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, the transaction does not qualify as a business combination.

The following amendments published by the IASB had not yet been adopted by the European Union at 30 June 2020:

  • Amendment to IFRS 16 – Leases – Covid-19- Related Rent Concessions. IFRS 16 requires lessees to

consider individual lease contracts to determine whether certain rent concessions are lease modifications. If this is the case, the lessee must remeasure the lease liability by applying a revised discount rate. The amendment to IFRS 16 exempts lessees from having to determine whether rent concessions occurring as a direct consequence of the Covid- 19 pandemic are lease modifications and allows lessees to account for such rent concessions as if they were not lease modifications by recognising their impact in profit or loss

for the period. It applies to Covid-19-related rent concessions that reduce lease payments due in 2020.

The amendment does not grant any relief to lessors from the obligation of analysing rent concessions to determine whether they are lease modifications.

  • Amendments to IAS 1 – Presentation of Financial Statements – Classification of Liabilities as Current or Non- current. These amendments clarify the criteria for classifying liabilities as current or non-current, which could consequently affect a company's loan covenants. To give companies time to prepare for the amendments, the IASB has set the effective date for these amendment at January 2022.
  • Annual Improvements, 2018-2020 cycle – IFRS 9 – Financial Instruments. To determine whether a modified financial liability should be derecognised, its terms are examined to assess whether they are substantially different from those of the original liability. The amendment clarifies the fees a company includes in the "ten percent test" used to perform this assessment. It stipulates that only fees paid or received between the company (the borrower) and the lender should be taken into account.

I – 2) Accounting conventions

The consolidated financial statements are presented in thousands of euros. They include the financial statements of SFL and its subsidiaries. The financial statements of subsidiaries cover the same period as those of SFL and have been prepared according to the same accounting policies. Intragroup transactions are eliminated in consolidation.

Subsidiaries are consolidated from the date when control is acquired and are removed from the scope of consolidation when control is transferred outside the Group. When SFL ceases to exercise control over a subsidiary, the consolidated financial statements include the subsidiary's results for the period from the beginning of the period to the date when control is transferred.

Material companies in which the Group exercises control, pursuant to the terms of a shareholders' pact, through ownership of the majority of voting rights or otherwise, are fully consolidated.

The Group has chosen to measure investment property using the fair value model (see Note IV-4).

I – 3) Critical accounting estimates and judgements

The property portfolio is valued by independent experts using assumptions concerning future cash flows and interest rates that have a direct impact on their valuations. A reduction in the value assessed by these experts would lead to a decrease in the Group's earnings (see Note IV-4).

No properties were purchased or sold in first-half 2020.

During the period, leases were signed on some 16,000 sq.m., including approximately 10,000 sq.m. of office space, of which a portion was pre-let to Goldman Sachs in the 83 Marceau building that is currently being redeveloped. New leases on retail space represented around 6,000 sq.m. and mainly concerned the theatre in the Édouard VII complex.

All of the Group's financial instruments are measured using standard market valuation models (see Note VI-4).

II –

Significant Events of the Period

II – 1) Redevelopment and renovation programmes

Properties undergoing development at 30 June 2020 represented roughly 17% of the total portfolio. They consist

mainly of the Group's current three flagship projects

concerning:

  • Retail space in the Louvre Saint-Honoré building, which is scheduled for delivery in 2023 under a turnkey lease on over 20,000 sq.m. The planning appeal process for the building permit obtained in March 2019 has ended (the permit is now final) and clearance and asbestos removal work is currently in progress;
  • The Biome office complex on avenue Emile Zola

II – 2) Financing

During the period, SFL issued €500 million worth of 1.50% seven-year bonds due on 5 June 2027.

In addition, a new five-year €150 million revolving line of credit was obtained from BNP Paribas. This new facility cancels and replaces a previous €150 million revolving line of credit that was reduced to €100 million in 2019 and was due to expire in May 2021.

The bond issue and revolving line of credit will be used for general corporate purposes: they have extended the average maturity of the Group's debt as part of its proactive balance sheet management strategy.

II – 3) Impacts of the Covid-19 health crisis

As soon as the crisis emerged, SFL took all necessary measures to limit the pandemic's effects on its business and results.

The Group acted swiftly to ensure that all of its properties could remain open and available for use by tenants. The only services not still available were those that would breach the public health measures introduced in response to the pandemic (mainly food services).

(approximately 24,000 sq.m.), which will be comprehensively remodelled by end-2021. The planning appeal process for the building permit obtained in May 2018 has ended (the permit is now final), the property has been cleared and prepared for renovation and remodelling work has begun;

  • The office building at 83 avenue Marceau (approximately 9,000 sq.m.), which is in the process of being redeveloped, with delivery scheduled for 2021. Most of the units have been pre-let, including almost 6,500 sq.m. (81% of the building's total surface area) let under a turnkey lease signed in first-half 2020.

SFL's rental income was largely unaffected by government measures concerning small retail outlets because of its strategic focus on prime office properties in Paris. Calls for help received from retail tenants were analysed on a case- by-case basis and the Group endeavoured to support them as far as possible during this difficult period, for example by allowing them to defer payment of their second-quarter rent or, in some cases, granting rent waivers. In addition to the approximate €0.7 million cost of these rent waivers, provisions of around €0.2 million were booked for second- quarter rents outstanding at 30 June that may not be recoverable. The rent collection rate for second- quarter 2020 stood at 86.5% at 30 June 2020. Lastly, income

from the conference centres and the Indigo hotel, which have been closed since the beginning of lockdown, as well as the public car park located in the Edouard VII complex, fell sharply compared with first-half 2019. In all, the Covid- 19 crisis reduced rental income for the period by approximately €2.9 million (€1.7 million after deducting net property expenses).

Work on the Group's redevelopment and renovation projects was halted for several weeks. Agreements were signed with the general contractors responsible for the main projects, in order to manage the delivery delays – estimated at several months – and the cost overruns caused by these disruptions and the deployment of health measures required before work could resume.

The rental market slowed as a result of the crisis without coming to a complete halt; however, SFL was largely unaffected because it had very few vacant units

immediately available for rental and was able to sign several leases on significant units during the period.

The assumptions used by the Group's valuers to estimate the portfolio's appraisal value at 30 June 2020 were adjusted to take account of the economic environment. Despite these adjustments, the valuers' report includes a material valuation uncertainty declaration in line with the practice alert issued by the RICS.

II – 4) Subsequent events

None.

III – Segment Information

The Group's properties are similar in nature and, although they are managed separately in the same manner, none are large enough to be treated as a separate reportable segment. They are grouped into geographical segments in accordance with IFRS 8.

Comprehensive income can be analysed as follows by geographical segment:

(in thousands of euros)

Paris CBD

Autre

Occidental

Entreprise

First-half 2020

Paris

Crescent

Rental income

76,121

13,857

1,212

91,190

Gross property expenses

(16,122)

(4,095)

(762)

(20,979)

Property expenses recovered from tenants

13,508

2,386

331

16,225

Property expenses, net of recoveries

(2,614)

(1,709)

(431)

(4,754)

Net property rentals

73,507

12,148

781

86,436

Other income

787

53

209

1,049

Depreciation, amortisation and impairment

(486)

(486)

Provision expense, net

(185)

(134)

(474)

(793)

Employee benefits expense

(6,556)

(6,556)

Other expenses

(4,831)

(4,831)

Profit/(loss) on disposal of other assets

Fair value adjustments to investment property

23,746

23,409

(4,349)

42,806

Operating profit/(loss)

97,855

35,476

(3,568)

(12,138)

117,625

Finance costs and other financial expenses

(16,115)

(16,115)

Financial income

2,486

2,486

Fair value adjustments to financial instruments

(dix)

(dix)

Discounting adjustments to receivables and payables

(78)

(78)

Profit/(loss) before income tax

97,855

35,476

(3,568)

(25,855)

103,908

Income tax benefit

5,578

5,578

Profit/(loss) for the period

97,855

35,476

(3,568)

(20,277)

109,486

Attributable to owners of the parent

103,751

35,476

(3,568)

(22,008)

113,651

Attributable to non-controlling interests

(5,896)

1,731

(4,165)

Other comprehensive income

Actuarial gains and losses

(271)

(271)

Other comprehensive income

Items that will not be reclassified to profit or loss

(271)

(271)

Valuation gains and losses on financial instruments

(4,683)

(4,683)

(cash flow hedges)

Deferred tax impact of valuation gains and losses on financial

instruments

Items that may be reclassified subsequently to profit or loss

(4,683)

(4,683)

Other comprehensive income/(loss)

(4,954)

(4,954)

Comprehensive income/(loss)

97,855

35,476

(3,568)

(25,231)

104,532

Attributable to owners of the parent

103,751

35,476

(3,568)

(26,962)

108,697

Attributable to non-controlling interests

(5,896)

1,731

(4,165)

(in thousands of euros)

Paris CBD

Autre

Occidental

Entreprise

30 June 2020

Paris

Crescent

Segment assets

5,951,422

1,156,633

111,215

295,008

7,514,278

Unallocated assets

34,243

34,243

Total des actifs

5,951,422

1,156,633

111,215

329,251

7,548,521

24

The segment analysis for the prior-year period breaks down as follows:

(in thousands of euros)

Paris CBD

Autre

Occidental

Entreprise

First-half 2019

Paris

Crescent

Rental income

81,357

15,594

958

97,909

Gross property expenses

(17,314)

(4,152)

(658)

(22,124)

Property expenses recovered from tenants

13,689

2,855

238

16,782

Property expenses, net of recoveries

(3,625)

(1,297)

(420)

(5,342)

Net property rentals

77,732

14,297

538

92,567

Other income

926

224

129

1,452

2,731

Depreciation, amortisation and impairment

(487)

(487)

Provision (expense)/reversals, net

(47)

335

(355)

(67)

Employee benefits expense

(6,597)

(6,597)

Other expenses

(4,881)

(4,881)

Profit/(loss) on disposal of other assets

(3)

(3)

Fair value adjustments to investment property

214,737

20,586

(857)

234,466

Operating profit/(loss)

293,348

35,442

(190)

(10,871)

317,729

Finance costs and other financial expenses

(15,775)

(15,775)

Financial income

2,465

2,465

Fair value adjustments to financial instruments

(1,718)

(1,718)

Discounting adjustments to receivables and payables

(182)

(182)

Changes in provisions for financial assets, net

Profit/(loss) before income tax

293,348

35,442

(190)

(26,081)

302,519

Income tax expense

(17,152)

(17,152)

Profit/(loss) for the period

293,348

35,442

(190)

(43,233)

285,367

Attributable to owners of the parent

252,111

35,442

(190)

(33,814)

253,549

Attributable to non-controlling interests

41,237

(9,419)

31,818

Other comprehensive income

Actuarial gains and losses

(128)

(128)

Other comprehensive income/(loss)

Items that will not be reclassified to profit or loss

(128)

(128)

Valuation gains and losses on financial instruments

(cash flow hedges)

Deferred tax impact of valuation gains and losses on financial

instruments

Items that may be reclassified subsequently to profit or loss

Other comprehensive income/(loss)

(128)

(128)

Comprehensive income/(loss)

293,348

35,442

(190)

(43,361)

285,239

Attributable to owners of the parent

252,111

35,442

(190)

(33,942)

253,421

Attributable to non-controlling interests

41,237

(9,419)

31,818

(in thousands of euros)

Paris CBD

Autre

Occidental

Entreprise

30 June 2019

Paris

Crescent

Segment assets

5,628,717

1,051,082

98,436

64,887

6,843,122

Unallocated assets

26,907

26,907

Total des actifs

5,628,717

1,051,082

98,436

91,794

6,870,029

25

Segment assets correspond mainly to the Group's property assets.

No segment analysis of liabilities is presented, as they correspond primarily to unsecured financing for general corporate purposes and unsecured bonds that are not allocated to any specific segment.

The Group's main geographical segments are as follows:

  • Paris Central Business District: market comprising the Golden Triangle and the Financial District, spanning parts of the 1st, 2nd, 9e, 8e, 16e and 17e arrondissements of Paris. The segment extends from Porte Maillot, avenue de Malakoff and Trocadéro in the west to rue Montmartre and rue du Louvre in the east, and from Porte Champerret, avenue de Villiers and Saint-Lazarerailway station in the north to rue de Rivoli in the south.
  • Other Paris: corresponding to the rest of Paris, outside the Central Business District.
  • Western Crescent: located to the west of Paris on the other side of the Boulevard Périphérique ring-road, comprising notably Neuilly-sur-Seine, Boulogne- Billancourt, Issy-les-Moulineaux and Levallois-Perret.

These geographic segments have been defined by the main Paris-based real estate professionals by combining neighbourhoods with similar economic features.

IV – Intangible Assets, Property and Equipment, and Investment Property

IV – 1) Intangible assets

Accounting policy

Intangible assets correspond mainly to purchased software and software development costs incurred in connection with the Group's systems upgrades, accounted for inaccordance with IAS 38.

Intangible assets are carried at cost less accumulatedamortisation and any accumulated impairment losses. Intangible assets with a finite useful life are amortised on a straight-line basis over their useful life. Immobilisations incorporelles

with an indefinite useful life are not amortised but are tested for impairment annually (in accordance with IAS 36)or more frequently if there is an indication that they may be impaired.

Software development costs for the main projects are amortised over the software's expected period of use from the date it is put in production. Other software development costs are amortised over the period in whichthey are capitalised.

(in thousands of euros)

31 December 2019

Increases

Decreases

Reclassifications

30 June 2020

Coût

Computer software

6,750

6,750

Autre

1,204

566

1,770

Amortisation and impairment

Computer software

(6,635)

(27)

(6,662)

Autre

(787)

(46)

(833)

Carrying amount

532

493

1,025

26

IV – 2) Property and equipment

Accounting policy

Property and equipment consist mainly of furniture,computer equipment and owner-occupiedpropriété. Owner-occupied property is property held by the owner for use in the production or supply of goods or services or for administrative purposes. The only property in this category is the section of the Washington Plaza buildingused by the Group for administrative purposes.

Property and equipment are carried at cost less accumulated depreciation and any accumulated impairment losses, in accordance with IAS 16. Depreciation is calculated by the straight-line method over the asset's estimated useful life. Each part of an itemof property or equipment with a cost that is significant in relation to the total cost of the item is depreciatedseparately.

Washington Plaza owner-occupied property:

coquille

105 to 118 years

Roof, windows, doors

8 to 24 years

Fixtures, fittings

5 to 29 years

and installations

Other:

Fixtures and installations

2 to 20 years

Fittings and equipment

5 to 10 years

Computer and other equipment

2 to 5 years

The gain or loss arising from derecognition of an item of property or equipment, corresponding to the difference between the net disposal proceeds and the carrying amount of the item, is included in profit when the item isderecognised.

(in thousands of euros)

31 December 2019

Increases

Decreases

Reclassifications

30 June 2020

Coût

Owner-occupied property

21,238

21,238

Other property and equipment

6,261

776

7,037

Depreciation and impairment

Owner-occupied property

(3,507)

(183)

(3,690)

Other property and equipment

(3,667)

(230)

(3,897)

Carrying amount

20,325

363

20,688

The fair value excluding transfer costs of owner-occupied property – corresponding to the Company's headquarters – was €48,724 thousand at 30 June 2020 and €48,291 thousand at 31 December 2019.

IV – 3) Depreciation, amortisation and impairment

(in thousands of euros)

First-half 2020

First-half 2019

Amortisation and impairment of intangible assets

(73)

(71)

Depreciation and impairment of property and equipment

(413)

(416)

Total

(486)

(487)

Amortisation and impairment of intangible assets relate to computer software. Depreciation and impairment of property and equipment concern owner-occupied property (corresponding to the Company's headquarters) and other property and equipment.

27

IV – 4) Investment property

Accounting policy

Investment property is property held by the owner or by the lessee under a finance lease to earn rentals or for capitalappreciation or both.

Acquisitions of property companies that do not meet the definition of a business combination under IFRS 3 are treated as direct acquisitions of the underlying investmentpropriété.

The properties are initially recognised at cost. SFL has chosen to measure investment property in subsequent periods using the fair value model as provided for in IAS 40 (paragraph 30). Under this model, investment property is measured at fair value and gains or losses arising from changes in fair value are recognised in profit or loss.Investment property is not depreciated.

The fair value of investment property is the amount at which the property could be exchanged between knowledgeable, willing parties in an arm's length transaction. The fair values of investment property carried

in the Group's statement of financial position correspond to the prices obtained from independent valuationsperformed using the method described below.

Changes in fair value, which are recognised in the income statement under "Fair value adjustments to investmentproperty", are calculated as follows:

Change in fair value = Market value at the period-end – Market value at the prior period-end – Work and other costscapitalised during the period.

The change in fair value is adjusted to exclude the effects of specific lease terms or provisions recognised under other asset captions and included in the fair value calculation, toavoid these effects being taken into account twice.

Investment property is reclassified as held for sale when the sale has been decided by the Board of Directors or a selling agent has been appointed. It continues to be measured atfair value after reclassification in accordance with IFRS 5.

Valuation method

The Group's entire property portfolio was valued at 30 June 2020 by Cushman & Wakefield and CBRE.

The valuations were performed in accordance with the Charte de l'Expertise en Evaluation Immobilière (property valuation charter) included in the February 2000 report of France's securities regulator (COB, renamed AMF), and also complied with the standards issued by The European Group of Valuers' Associations (TEGoVA) as well as with Royal Institution of Chartered Surveyors (RICS) standards.

Independent experts are rotated in compliance with the SIIC code of ethics, which states:

"Regardless of the number of independent experts used by the SIIC, the following principles must be upheld:

  • Appointments should be based on a selection process evaluating each candidate's independence, qualifications and competency to value property within the asset classes and geographical locations concerned.
  • When a firm of valuers is used, the SIIC should ensure that the firm's internal valuation teams are rotated after a period of seven years.
  • An independent valuer may serve for no more than two four-year terms for any given client, unless that valuer is a company in which case the above team rotation rule applies."

The Group's portfolio is appraised at half-yearly intervals by a group of two independent firms, each of which is responsible for valuing part of the total portfolio as follows

(the percentages below are determined by reference to the total value of the properties, excluding transfer costs):

  • Cushman & Wakefield: 56%
  • CBRE: 44%

The firms ensure that their internal teams are rotated as required. In addition, certain properties are assigned to different valuers each year to ensure a gradual rotation of assets among them. The valuers' fees are agreed before the appraisal process begins and do not depend in any way on the value of the properties to be appraised. They are determined at a flat rate based exclusively on the number of properties to be valued and the complexity of the appraisal process. The only fees paid to the valuers in first-half 2020 concerned the half-yearly appraisals. Fees were also paid to a CBRE group company.

The properties are valued primarily by the discounted cash flows method, which consists of discounting projected future cash flows. Assumptions concerning future revenue flows take into account passing rents, estimated market rents for the period beyond the lease expiry dates, any rent- free periods and rent step-ups, vacancy risk and projected changes in the construction cost index (ICC), office rent index (ILAT) and retail rent index (ILC). Each property is analysed in detail, according to the type of use and the surface area of each unit, lease by lease.

Based on information provided by the Group, the valuers noted that rents on certain units were above or below market rents for the period on similar properties. These differences were taken into account to value the properties according to their current occupancy, based on the duration of the underlying leases.

Vacant units were valued on the basis of assumed rents, excluding rent for the estimated marketing period, after deducting remaining renovation costs for the period until the units are re-let and any rent-free period expected to be granted. Expenditure assumptions cover non-recoverable costs – determined on a lease-by-lease basis – and projected capital expenditure to achieve the asset's highest and best use as defined by IFRS 13. The value of assets in the process of being redeveloped or renovated includes the estimated cost of completing the work.

Net cash flows for the final year of the projection period are capitalised to calculate the terminal value, corresponding to the property's resale price at the end of the period.

The results obtained are then compared to market data and adjusted, if necessary, to obtain a market-consistent value. However, given that these appraisal values are essentially estimates that are sensitive to changes in rental values and discount rates, the proceeds from the sale of certain property assets may be different to their appraisal value, even if the sale takes place within a few months of the period-end.

The property markets in first-half 2020 were adversely affected by the Covid-19 pandemic and the valuers therefore placed less weight on prior period comparable market prices for their valuation. The valuers' report includes a material valuation uncertainty declaration in line with RICS Valuation – Global Standards VPS 3 and VPGA 10, stating that the appraisal values are less certain and more conservatively estimated than in normal circumstances.

The appraisal values are quoted both including transfer costs (calculated on the basis of a standard 7.5% rate for all properties subject to registration duty and 1.80% for

properties subject to VAT) and excluding transfer costs and acquisition expenses.

Fair value measurement of investment property

IFRS 13 – Fair Value Measurement establishes a single definition of fair value and describes all the information concerning fair value to be disclosed in the notes to the financial statements.

Fair value measurement of a non-financial asset considers a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The valuation of investment property takes into account this definition of fair value.

In IFRS 13, fair value measurements are categorised into a three-level hierarchy. Level 3 concerns unobservable inputs for the asset or liability. An entity develops unobservable inputs using the best information available in the circumstances, which might include the entity's own data, taking into account all information about market participant assumptions that is reasonably available.

Due to the nature of the investment property market in France and the characteristics of the Group's investment property, the most meaningful inputs, particularly market rents, investment yields and/or discount rates, represent Level 3 inputs.

Gains from

Losses from

(in thousands of euros)

31 December 2019

Increases

remeasure-

Decreases

remeasure-

Reclassifica-

30 June 2020

ment

ment

tions

at fair value

at fair value

Investment property

7,045,049

36,816

133,613

(90,807)

7,124,671

Total

7,045,049

36,816

133,613

(90,807)

7,124,671

29

Reconciliation of the appraisal value of investment property to their fair value in the statement of financial position:

(in thousands of euros)

30 June 2020

31 December 2019

Appraisal value of investment property, excluding transfer costs

7,239,001

7,157,690

Deduction of owner-occupied property (see Note IV-2)

(48,724)

(48,291)

Adjustments to reflect specific lease terms and other adjustments

(65,606)

(64,350)

Fair value of investment property in the statement of financial position

7,124,671

7,045,049

The table below shows the fair value measurement inputs for each asset class:

Geographic area

Value excluding transfer costs

Inputs

Range of values(1)

Weighted

30 June 2020

(in € millions, on a 100% basis)

average(1)

Paris Central Business District

5,993

Market rent for offices

€630 – €920

€762

Exit yield

2.75% – 3.21%

3.14%

Discount rate

3.90% – 4.45%

4.07%

Other Paris

1,135

Market rent for offices

€548 – €744

€615

Exit yield

3.15% – 3.50%

3.29%

Discount rate

4.10% – 5.60%

4.55%

Western Crescent

111

Market rent for offices

€313 – €523

€465

Exit yield

3.64% – 5.00%

4.01%

Discount rate

4.50% – 6.10%

4.94%

Total

7,239

  1. Offices.

A 25-bps increase in the exit yield combined with a 25-bps increase in the discount rate would have the effect of reducing the portfolio's appraisal value by €576,410 thousand, while a 25-bps decrease in the exit yield combined with a 25-bps decrease in the discount rate would have the effect of increasing the portfolio's appraisal value by €692,589 thousand.

30

V -1) Net property rentals

Accounting policy

Revenue is recognised when it is probable that the economic benefits associated with the transaction will flowto the Group and the amount can be measured reliably. le specific revenue recognition criteria applied by the Groupsont les suivants:

Rental income

Rental income from investment property is recognised on a straight-line basis over the fixed lease term. The transfer of economic benefits corresponds to the date stipulated in the contract, or to the tenant's entry date if stipulated in the contract. Rental income also comprises income fromexternal management contracts.

Specific lease terms

Current leases include various specific terms concerning rent-free periods, step-up clauses, key money and eviction compensation. In compliance with IFRS 16, the effects of

rent-free periods and step-up clauses are recognised overles non-cancellablelease term.

Key money received by the lessor is recognised in propertyrentals over the non-cancellablelease term.

Penalties paid by tenants for terminating their lease in advance of the expiry date are treated as revenue from the terminated lease and are recognised in revenue on thepayment date.

Eviction compensation may be paid to secure the departureof a tenant, either to allow renovation work to be performed or so that the property can be re-let at a higher rent. In both cases this has the effect of increasing the asset's value and the compensation is therefore capitalisedas part of the cost of the asset.

Property expenses

Following a more detailed analysis of the principal versus agent distinction under IFRS 15, the Group concluded that it acts as principal. Accordingly, it now presents gross property expenses separately from property expenses recovered from tenants in the statement of comprehensiveincome.

The Group's principal business is the rental of office and retail properties. Net property rentals take into account the positive net impact of recognising rent-free periods and rent step-ups over the non-cancellable lease term. In first-half 2020, this

impact was €1,256 thousand. Revenue from external management contracts amounted to €2,115 thousand.

Future minimum lease payments receivable over the remaining term of non-cancellable operating leases break down as follows:

Due in 1 to

Due in 2 to

Due in 3 to

Due in 4 to

(in thousands of euros)

Total

dans

beyond

2 years

3 years

4 years

5 années

1 year

5 années

Rental income

1,106,210

187,129

166,865

129,426

108,634

77,260

436,896

V – 2) Other income

(in thousands of euros)

First-half 2020

First-half 2019

Own-work capitalised

186

1,432

Other income

863

1 299

Total

1,049

2,731

The caption "Other income" corresponds mainly to rental repairs and other work billed to tenants.

31

V – 3) Trade and other receivables

Accounting policy

Trade receivables are initially recognised at amortised cost, corresponding to the initial invoice amount. Upon origination, the receivables are written down using the simplified expected loss-to-maturity model, in accordance with IFRS 9. The model is based on observed actual

historical losses and projections of expected future losses taking into account identified risk factors. In subsequent periods, the collection risk is systematically reviewed on a case-by-case basis, and a loss allowance is recorded ifnecessary to reflect the incurred risk.

(in thousands of euros)

30 June 2020

31 December 2019

Total

Due within 1 year

Due in 1 year or more

Trade receivables

84,068

33,007

51,061

69,364

Provisions

(1,629)

(539)

(1,090)

(1,417)

Trade receivables

82,439

32,468

49,971

67,947

Prepayments to suppliers

84

84

63

Employee advances

47

47

11

Tax receivables (other than income tax)

10,726

10,726

8,430

Other operating receivables

1,521

1,521

1,773

Other receivables

235

235

511

Other receivables

12,613

12,613

10,788

Total

95,052

45,081

49,971

78,735

Trade receivables include outstanding receivables, and receivables relating to the recognition of rent-free periods and rent concessions in accordance with IFRS for an amount of €65,606 thousand (of which €16,550 thousand is due within one year). Receivables do not bear interest.

Cost of risk can be analysed as follows:

(in thousands of euros)

First-half 2020

First-half 2019

Increases in provisions

(324)

(323)

Reversals of provisions

5

41

Bad debt write-offs, net of recoveries

(3)

Total

(319)

(285)

Rental income

91,190

198,710

Net losses as a % of rental income

0,35%

0.14%

V – 4) Other current and non-current assets

(in thousands of euros)

30 June 2020

31 December 2019

Prepayments

30,432

8,233

Total other non-current assets

30,432

8,233

Income tax prepayments

1,906

173

Prepayments

3,344

61

Total other current assets

5,250

234

Prepayments recorded under "Non-current assets" concern redevelopment work on the Biome and 83 Marceau buildings.

32

V – 5) Trade and other payables

(in thousands of euros)

30 June 2020

31 December 2019

Trade payables

16,698

8,247

Amounts due within one year on asset acquisitions

24,240

17,949

Total

40,938

26,196

V – 6) Other current and non-current liabilities

(in thousands of euros)

30 June 2020

31 December 2019

Deposits

26,850

26,870

Total other non-current liabilities

26,850

26,870

Deposits

3,830

14,425

Customer prepayments

13,020

22,800

Accrued employee benefits expense

3,972

5,494

Accrued taxes

11,826

13,771

Other liabilities

19,562

4,794

Accruals

2,903

456

Total other current liabilities

55,113

61,740

The caption "Deposits" corresponds mainly to guarantee deposits and bonds received from tenants. Accrued employee benefits expense includes statutory and discretionary profit-sharing and bonus accruals.

Accrued taxes include the exit tax instalment due in 2020 and related to the Biome building, for a total of €5,248 thousand.

Other liabilities include the dividend payable by SFL to its shareholder Predica in respect of its interest in SCI Washington and the Parholding subgroup.

The amounts reported under "Accruals" correspond to deferred revenue.

V – 7) Other expenses

(in thousands of euros)

First-half 2020

First-half 2019

Fees

(686)

(790)

Taxes other than on income

(1,470)

(1,379)

Autre

(2,675)

(2,712)

Total

(4,831)

(4,881)

33

VI – Financing Activities

VI – 1) Borrowings and other interest-bearing debt

Accounting policy

Loans and borrowings are initially recognised at fair value, corresponding to the consideration paid or received, net ofdirectly attributable transaction costs.

Interest-bearing loans and borrowings are subsequently measured at amortised cost, using the effective interest method. Amortised cost takes into account all debt issuance

costs and any difference between the initial amount and the amount at maturity. Finance costs are recalculated based on this amortised cost figure and the related effectiveinterest rate.

Borrowing costs directly attributable to the acquisition, construction or production of property assets arecapitalised as part of the cost of the asset.

30 June

31 December

30 June

31 December

2020

2019

2020

2019

(in thousands of euros)

Effective interest rate

Expiry date

Short-term portion

Long-term portion

Bonds

€350 million bond issue, 2014-2021

1.875%

26 Nov. 2021

3,908

647

350,000

350,000

€350 million bond issue, 2015-2022

2.25%

16 Nov. 2022

4,906

992

350,000

350,000

€500 million bond issue, 2018-2025

1.50%

29 May 2025

678

4,459

500,000

500,000

€500 million bond issue, 2020-2027

1.50%

5 June 2027

534

500,000

Bank loans

Natixis – Deka – Deutsche Hypotheken

1.571%

16 July 2022

2,616

2,619

196,040

197,080

Due within

Negotiable European

Fixed rate (payable in advance)

1 year

248,500

386,500

commercial paper (NEU-CP)

Interest rate swaps

CA-CIB5-year swap

0.23%

4 June 2020(1)

60

1,605

CA-CIB5-year swap starting 26 Nov.

2021

-0.3475%

26 Nov. 2026

134

Current account advances (liabilities)

Various

33

23

49,866

49,866

Impact of deferred recognition of

(3,163)

(2,486)

(10,046)

(7,061)

debt arranging fees

Total

258,012

392,814

1,935,994

1,441,490

  1. ate on which the instrument was unwound (see Note VI.3)

The following table analyses borrowings by maturity:

(in thousands of euros)

30 June 2020

Due within 1 year

Due in 1 to 5 years

Due beyond 5 years

31 December 2019

Bonds

1,710,026

10,026

1,200,000

500,000

1,206,098

Natixis/Deka/Deutsche Hypothekenbank

198,656

2,616

196,040

199,699

Negotiable European commercial paper

248,500

248,500

386,500

(NEU-CP)

CA-CIB5-year 0.23% swap

1,665

CA-CIB5-year-0.3475% swap

134

134

Current account advances (liabilities)

49,899

33

49,866

49,889

Deferred debt arranging fees

(13,209)

(3,163)

(8,846)

(1,200)

(9,547)

Total

2,194,006

258,012

1,437,194

498,800

1,834,304

34

Current account advances correspond to Predica's minority interest in SCI Washington.

Debt covenants and acceleration clauses in force at 30 June 2020 concerned lines of credit: Société Générale, BECM, BNP Paribas, Cadif and Banque Postale. They can be broken down as follows:

Applicable ratios

Actual ratios at

Actual ratios at

Main

30 June 2020

31 December 2019

acceleration clauses

Loan-to-value (LTV) <= 50%

24.3%

22.7%

Loan default

Termination of operations

Interest cover >= 2x

5,6

6,6

Bankruptcy proceedings

Secured LTV <= 20%

2.6%

2.6%

Breach of financial covenants

Unrestricted property portfolio value >= €2bn

€6.6bn

€6.5bn

Material adverse event

The Group was not in breach of any of its financial covenants at 30 June 2020.

VI – 2) Finance costs and other financial income and expenses

(in thousands of euros)

First-half 2020

First-half 2019

Interest on bank loans, bonds and commercial paper

(14,364)

(14,074)

Interest on external current account advances

(61)

(76)

Interest on hedging instruments

(274)

(273)

Autres charges financières

(1,416)

(1,352)

Finance costs and other financial expenses

(16,115)

(15,775)

Le revenu d'intérêts

32

46

Financial expense transfers

2,454

2,419

Financial income

2,486

2,465

Finance costs and other financial income and expenses, net

(13,629)

(13,310)

Financial expense transfers correspond to finance costs capitalised at the rate of 1.34% during the redevelopment of the

Louvre Saint-Honoré, Biome and 83 Marceau buildings.

VI – 3) Financial instruments

Accounting policy

The Group uses derivative instruments such as interest rate swaps and caps to hedge the risk of changes in interest rates. These instruments are measured at fair value at each period-end.

Instruments acquired as cash flow hedges are eligible for hedge accounting. The portion of the gain or loss on these instruments that is determined as being an effective hedgeis recognised directly in equity and the ineffective portion is recognised through profit or loss. When a hedging relationship is discontinued, it no longer qualifies for hedge accounting and any subsequent changes in fair value of the hedging instrument are recognised directly through profit

or loss. The cumulative gains and losses on the instrument recorded in equity at that date are reclassified ("recycled")to the income statement over the remaining life of the hedged item.

For derivative instruments that do not qualify for hedge accounting, gains and losses from remeasurement at fairvalue are recognised through profit or loss.

Standard market valuation methods are used – corresponding to Level 2 inputs in the fair value hierarchy (see Note IV-5) – taking into account the risk of non- performance (particularly the Group's own credit risk), inline with IFRS 13.

At 30 June 2020, the Group's portfolio included:

  • UNE 5-year forward swap set up with CA-CIB (variable rate swapped for a fixed rate of -0.3475%) on a notional amount of €100,000 thousand. The swap will come into effect on 26 November 2021 and qualifies for hedge accounting as a cash flow hedge.
  • UNE 5-year forward swap set up with CIC (variable rate swapped for a fixed rate of -0.4525%) on a notional amount of €100,000 thousand. The swap will come into effect on 26 November 2021 and qualifies for hedge accounting as a cash flow hedge.
  • UNE 7-year collar set up with Société Générale (the option writer) on a notional amount of €100,000 thousand, with a 0% cap and a -0.7525% floor. No premium is payable on this collar which was set up on 4 September 2019. It is a cash flow hedge qualifying for hedge accounting.
  • UNE 5-year collar set up with CIC (the option writer) on a notional amount of €100,000 thousand, with a -0.25% cap and a -0.52% floor. No premium is payable on this collar, which will come into effect on 16 November 2022. It is a cash flow hedge qualifying for hedge accounting.

Hedging instruments at fair value

At 30 June 2020, the fair value of the hedging instruments amounted to €1,014 thousand, breaking down as follows:

(in thousands of euros)

Notional amount

Maturity

30 June 2020

31 December 2019

CA-CIB 0.23% swap

100,000

June 20(1)

(1,605)

CA-CIB swap at -0.3475%

100,000

Nov. 2026

(134)

1,877

CIC swap at -0.4525%

100,000

Nov. 2026

397

2,416

Société Générale collar 0%/ -0.7525%

100,000

Sept. 2026

290

1,404

CIC collar -0.25%/-0.52%

100,000

Nov. 2027

461

Total

1,014

4,092

  1. ate on which the instrument was unwound.

Fair value adjustments to financial instruments (income statement)

(in thousands of euros)

First-half 2020

First-half 2019

Interest rate hedges

(dix)

(1,718)

Total

(dix)

(1,718)

The 5-year swap set up with CA-CIB (variable rate swapped for a fixed rate of 0.23%) on a notional amount of €100,000 thousand that came into effect on 28 November 2017 and was measured at fair value through profit or loss, was wound up in advance in June 2020, giving rise to a cash payment of €1,625 thousand.

Fair value adjustments to financial instruments (equity)

(in thousands of euros)

30 June 2020

30 June 2019

Interest rate hedges

(4,683)

Total

(4,683)

Negative fair value adjustments to financial instruments qualified as cash flow hedges reduced equity by €4,683 thousand at 30 June 2020. At 30 June 2019, these instruments were measured at fair value through profit or loss.

36

VI – 4) Financial risk management objectives and policy

The Group prudently manages its various financial risks.

1 – Liquidity risk

Liquidity risk is covered by confirmed undrawn lines of credit. At 30 June 2020, SFL had access to confirmed undrawn lines of credit representing €1,040 million compared with €990 million at 31 December 2019. As shown in the graph below, the liquidity represented by these back-up facilities is sufficient to cover the Group's repayment obligations under its lines of credit up until June 2023.

SFL liquidity risk

2,000

1,500

1,000

500

0

Cumulative debt maturities

Maturities of back-up facilities

With its available credit lines, diversified debt structure and the quality of its assets, the Group manages its liquidity risk prudently and effectively.

The acceleration clauses contained in the facility agreements are presented in Note VI-1.

2 – Counterparty risk

All financial instrument contracts are entered into with leading financial institutions. The contracts concern either interest rate hedges or the short-term investment of available cash in money market funds. It should be emphasised that these same banks finance a portion of the Group's debt. Counterparty risks are minimised by keeping cash surpluses to a minimum. The rental deposits obtained from tenants offer protection against the risk of rent default. The Group considers that its exposure to counterparty risk on operations is not material.

37

3 – Market risk

The Group did not have any exposure to currency risk at 30 June 2020. Interest rate risks are prudently and actively managed using an information system that tracks changes in the financial markets and calculates the fair value of hedging instruments in real time, thereby allowing the Group to efficiently quantify and analyse the risks associated with interest rate fluctuations.

a/ Objectives and strategy

Standard interest rate derivatives and fixed rate borrowings are used with the dual objective of reducing the sensitivity of borrowing costs to rising interest rates and minimising the cost of the derivatives. Steeper or flatter yield curves, market volatility, intrinsic interest rate levels and expected interest rate trends influence the choice of hedging instruments.

At 30 June 2020, 93% of debt was hedged against interest rate risks.

SFL debt hedging rate

2020 – 2026

100%

90%

80%

70%

60%

50%

40%

30%

20%

dix%

0%

Sep 2020

Jan 2021

May 2021

Sep 2021

Jan 2022

May 2022

Sep 2022

Jan 2023

May 2023

Sep 2023

Jan 2024

May 2024

Sep 2024

Jan 2025

May 2025

Sep 2025

Jan 2026

May 2026

Sep 2026

b/ Risk assessment

The average spot cost of debt stood at 1.49% at 30 June 2020, versus 1.37% at 31 December 2019.

A 50-basis point rise in interest rates across the yield curve in first-half 2020 would have had the effect of increasing the average cost of debt to 1.55%, driving up finance costs for the period by €617 thousand or 3.83%. A 50-basis point decline in interest rates across the yield curve would have had the effect of decreasing the average cost of debt

to 1.44%, reducing finance costs for the period by €564 thousand or 3.50%.

Concerning hedging instruments, a 50-basis point increase in interest rates would have had the effect of increasing

c/ Interest rate risk

the fair value of hedging instruments by €8,914 thousand at 30 June 2020, while a 50-basis point decrease would have had the effect of reducing their fair value by €9,475 thousand.

The following table provides an analysis by maturity of the notional amount of financial instruments exposed to interest rate risk at 30 June 2020.

Due in 1 to

Due in 2 to

Due in 3 to

Due in 4

(in thousands of euros)

Due within 1 year

beyond

Total

2 years

3 years

4 years

to 5 years

5 années

Negotiable European commercial paper

248,500

248,500

(NEU-CP)

Current account advances

49,866

49,866

Total floating rate debt

248,500

49,866

298,366

The other financial instruments used by the Group are not listed in the table above because they do not bear interest or are not exposed to any interest rate risk.

Fair value of bonds

The fair value of the Group's outstanding bond issues at 30 June 2020 was €1,747,736 thousand, as follows:

(in thousands of euros)

Notional amount

Maturity

30 June 2020

31 December

2019

November 2014 bonds

350,000

Nov. 2021

354,610

360,810

November 2015 bonds

350,000

Nov. 2022

361,891

369,588

May 2018 bonds

500,000

May 2025

517,485

524,145

June 2020 bonds

500,000

June 2027

513,750

Total

1,700,000

1,747,736

1,254,543

VI – 5) Financial assets

Accounting policy

Non-current financial assets comprise deposits paid to thirdparties and derivative instruments.

They are initially recognised at fair value, generally corresponding to their purchase price plus transactioncosts.

The accounting treatment of derivative instruments ispresented in Note VI-3.

Impairment

Impairment

losses

losses

(in thousands of euros)

31 December 2019

Increases

recognised

Decreases

reversed

30 June 2020

during the

during the

period

period

Deposits

2,529

(2,301)

227

Interest rate hedges

5,697

461

(5,010)

1,148

Total

8,225

461

(7,311)

1,375

The €2,300 thousand deposit paid by Parhaus in 2019 was reversed in the first half.

Hedging instruments with a positive fair value recognised in assets totalled €1,148 thousand at 30 June 2020 (see Note VI-3). The instruments concerned are cash flow hedges qualifying for hedge accounting.

38

VI – 6) Cash and cash equivalents

Accounting policy

Cash and cash equivalents carried in the statement of financial position include cash at bank and on hand and short-term deposits with original maturities of less than three months. They are short-term, highly liquid investments that are readily convertible into a known

amount of cash and that are subject to an insignificant riskof changes in value.

Cash and cash equivalents in the statement of cash flows correspond to cash and cash equivalents less bankoverdrafts.

(in thousands of euros)

30 June 2020

31 December 2019

Cash at bank and in hand

270,028

54,002

Total

270,028

54,002

VII – Equity and Earnings Per Share

VII – 1) Equity

Equity is analysed in the consolidated statement of changes in equity included in the financial statements.

The Company's share capital amounts to €93,058 thousand, represented by 46,528,974 ordinary shares with a par value of €2.

VII – 2) Treasury shares

Accounting policy

Acquisitions, disposals and cancellations of treasuryshares are recorded as a deduction from equity.

(in thousands of euros)

31 December 2019

Increases

Decreases

30 June 2020

Number of treasury shares

222,187

13,864

(60,258)

175,793

Average purchase/sale price, in

€69.84

€73.40

€60.61

€73.28

euros

Total

15,516

1,018

(3,652)

12,882

VII – 3) Dividends

(in thousands of euros)

First-half 2020

First-half 2019

Paid

Per share

Paid

Per share

Prior-year dividend paid in current year

122,828

€2.65

122,711

€2.65

Total

122,828

€2.65

122,711

€2.65

VII – 4) Earnings per share

Basic earnings per share are calculated by dividing profit attributable to ordinary owners of the parent by the weighted average number of shares outstanding during the period, net of treasury shares held at the period-end.

39

Diluted earnings per share are calculated by dividing profit attributable to ordinary owners of the parent by the weighted average number of shares outstanding during the period, net of treasury shares held at the period-end, as adjusted for the dilutive effect of outstanding performance shares awarded to employees and corporate officers.

(in thousands of euros)

First-half 2020

First-half 2019

Profit used to calculate basic earnings per share

113,651

253,549

Weighted average number of ordinary shares

46,528,974

46,528,974

Number of treasury shares

(175,793)

(225,257)

Weighted average number of ordinary shares excluding treasury shares

46,353,181

46,303,717

Basic earnings per share

€2.45

€5.48

Profit used to calculate basic earnings per share

113,651

253,549

Weighted average number of ordinary shares

46,528,974

46,528,974

Number of treasury shares

(175,793)

(225,257)

Effect of dilutive instruments on the average number of shares

65,947

59,297

Diluted weighted average number of ordinary shares excluding treasury shares

46,419,128

46,363,014

Diluted earnings per share

€2.45

€5.47

There were no other transactions on ordinary shares or potential ordinary shares between the period-end and the date when these financial statements were drawn up.

VII – 5) Non-controlling interests in net profit

(in thousands of euros)

First-half 2020

First-half 2019

SCI Washington

4,702

9,595

Rental income

3,824

3,969

Fair value adjustments to investment property

870

5,668

Net financial expense

(49)

(73)

Autre

57

31

Parholding subgroup

(8,867)

22,223

Rental income

6,897

7,608

Fair value adjustments to investment property

(17,341)

24,165

Net financial expense

(875)

(867)

Deferred tax

3,580

(6,875)

Current tax

(729)

(1,406)

Autre

(401)

(402)

Total

(4,165)

31,818

VIII – Provisions

VIII – 1) Short and long-term provisions

Accounting policy

A provision is recognised when the Group has a present obligation (legal or constructive) as a result of a past event, and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. Provisions are recorded in the financial statements if, and only if, it is probable that an outflow of

resources embodying economic benefits will be required tosettle the obligation.

Provisions for contingencies and charges are determined using Management estimates and assumptions based on information and circumstances existing at the time of the preparation of the financial statements, and thereforerequire the use of judgement.

When the Group expects reimbursement of some or all of the expenditure required to settle a provision, the reimbursement is recognised as a separate asset when, and only when, it is virtually certain that it will be received. Dans

the income statement, the provision expense is presentednet of the amount recognised for the reimbursement.

(in thousands of euros)

31 December 2019

Increases

Decreases

o/w

Actuarial gains

Reclassifications

30 June 2020

utilisations

and losses

Provisions for employee benefits

1,414

474

(7)

(7)

271

(492)

1,660

Long-term provisions

1,414

474

(7)

(7)

271

(492)

1,660

Provisions for refurbishment work and

475

475

tenant claims

Provisions for employee benefits

648

(648)

(648)

492

492

Short-term provisions

1,123

(648)

(648)

492

967

Total

2,537

474

(655)

(655)

271

2,627

Provisions for employee benefits include provisions for length-of-service awards payable to employees on retirement and jubilees for €1,386 thousand. See Note IX-2 for more details.

Short- and long-term provisions covering benefits payable to members of senior management amounted to €62 thousand at 30 June 2020 and €29 thousand at 31 December 2019.

VIII – 2) Provision (expense)/reversals, net

(in thousands of euros)

First-half 2020

First-half 2019

Charges to provisions for impairment of current assets

(324)

(112)

Charges to provisions for operating contingencies and charges

(370)

(307)

Charges to provisions for other contingencies and charges

(104)

(90)

Total charges

(798)

(509)

Reversals of provisions for impairment of current assets

5

68

Reversals of provisions for other contingencies and charges

374

Total reversals

5

442

Total

(793)

(67)

IX –

Remuneration and Other Employee Benefits

IX – 1) Employee benefits expense

Employee benefits expense breaks down as follows:

(in thousands of euros)

First-half 2020

First-half 2019

Wages and salaries

(3,305)

(3,382)

Payroll taxes

(1,649)

(1,722)

Other employee benefits

(1,466)

(1,196)

Statutory and discretionary profit-sharing

(136)

(297)

Total

(6,556)

(6,597)

The Group had 74 administrative staff (including 2 corporate officers) and 2 building staff at 30 June 2020, compared with 69 administrative staff and two building staff at 30 June 2019.

41

IX – 2) Length-of-service awards payable to employees on retirement

Accounting policy

IAS 19R requires companies to recognise all of their employee benefit liabilities in the statement of financial

Measurement method

Long-term employee benefits are recognised in the period in which the qualifying service is rendered by the employee. They are discounted at a rate defined in IAS 19. Short-term employee benefits are recognised in current liabilities and in expenses for the period.

position. Employee benefit plan costs are recognised over the vesting period. The main employee benefit plans concern length-of-service awards payable to employees onretirement.

They are calculated at six-monthly intervals based on actuarial assumptions. Actuarial gains and losses are included in "Other comprehensive income". The benefit cost is determined based on employee service rendered up to the measurement date, assuming employees retire at their own initiative.

(in thousands of euros)

30 June 2020

31 December 2019

Projected benefit obligation at beginning of period

1,018

902

Benefits paid during the period

(7)

(35)

Service cost

98

83

Interest cost

6

11

Actuarial gains and losses

271

57

Projected benefit obligation at end of period

1,386

1,018

The projected benefit obligation is calculated at six-monthly intervals based on actuarial assumptions, including, at

30 June 2020, a discount rate of 0.70% (31 December 2019: 0.69%) and a 2.00%-rate of future salary increases (unchanged from 31 December 2019). Actuarial gains and losses are recognised in equity.

A 25-bps reduction in the discount rate at 30 June 2020 would lead to a €32 thousand increase in the projected benefit obligation at that date.

The Group's employee benefit plans are as follows:

  • Length-of-serviceawards payable to employees on retirement: benefits payable under this plan are specified in a corporate agreement signed with employee representatives.
  • Post-employmentmedical care: this plan concerns a closed group of retired SFL employees. Benefits consist of the payment by SFL of two-thirds of the contributions due to the insurance company responsible for reimbursing medical costs.
  • Jubilees: the agreements in force within the Group provide for the payment of one month's salary to administrative staff who complete 20, 30, 35 and 40 years of service with the SFL Group, and one month's salary to building staff who complete 25 years of service.

Employees are not covered by any defined benefit pension plan and are not entitled to any other post-employment benefits. As the Group does not have any such defined benefit obligations, no sensitivity analyses are presented.

IX – 3) Share-based payments

Accounting policy

IFRS 2 requires all share-based payment transactions to berecognised in the income statement.

42

Measurement method

The total cost of each performance share plan is calculated at the grant date by multiplying the number of performance share rights that are expected to vest by the fair value per share.

The fair value of the performance shares is determined using the Capital Asset Pricing Model (CAPM), based on the share price on the grant date, adjusted for the discounted

Details of performance share plans at 30 June 2020

present value of future dividends payable during the vesting period. The number of shares expected to vest corresponds to the target number of allocated shares multiplied by the estimated vesting rate, taking into account each plan's specific vesting conditions.

The total cost calculated as explained above is recognised on a straight-line basis over the vesting period. The estimated vesting rate and the resulting estimated total cost are adjusted at each period-end to take account of the latest estimate of the number of shares expected to vest.

Plan no. 5

Plan no. 5

Plan no. 5

Date of shareholder authorisation

20 April 2018

20 April 2018

20 April 2018

Grant date (date of Board meeting)

20 April 2018

15 Feb. 2019

6 Feb. 2020

Initial target number of shares

33,592

32,948

34,476

Initial expected vesting rate

100.00%

100.00%

100.00%

Initial number of shares expected to vest

33,592

32,948

34,476

Fair value per share

€48.64

€54.00

€65.38

Rights cancelled/forfeited

(1,640)

(212)

Expected vesting rate at end of period

150.00%

100.00%

100.00%

Number of shares expected to vest at end of period

47,928

32,736

34,476

Main features of the plans

The plans' main features are as follows:

  • The shares will vest only if the grantee is still employed by the Group on the vesting date.
  • Performance target: the number of shares that vest depends on SFL's ranking among a group of six listed property companies based on growth in consolidated ANAV per share.
  • The performance shares will vest 15 business days after the publication, by the last of the Reference Companies to do so, of a press release announcing its results for the third financial year after the grant date.
  • Lock-upperiod: the performance shares may not be sold or otherwise transferred before the end of a period of two years as from the vesting date.

Accounting treatment

The expected vesting rate is adjusted to reflect SFL's most probable ranking at the end of the vesting period. At 30 June 2020, the rates applied were 150% for the 2018 plan (probable ranking: no. 2) and 100% for the 2019 and 2020 plans (probable ranking: no.3).

During first-half 2020, a total of 46,494 performance shares vested under 2017 Plan no.4.

The cost of performance share plans recognised in first-half 2020 amounted to €1,538 thousand (excluding specific employer contributions).

IX – 4) Related party information

The remuneration paid to the members of the Board of Directors and corporate officers breaks down as follows:

(in thousands of euros)

First-half 2020

First-half 2019

Short-term benefits, excluding payroll taxes(1)

2,309

2,017

Payroll taxes on short-term benefits

1,376

1,241

Share-based payments(2)

993

763

Directors' fees

396

287

Total

5,074

4,308

  1. Gross salary and other remuneration, bonuses, statutory and discretionary profit-sharing, matching Company payments and termination benefits paid during the period.
  2. Cost recognised in the income statement for stock options and employee rights issues.

At 30 June 2020, related-party transactions comprised current account advances representing the share of the minority shareholder, Predica, in SCI Washington (see Note VI-1).

X – Income Taxes

X – 1) Current and deferred tax liabilities

Accounting policy

Non-current liabilities with fixed maturities arediscounted.

Measurement method

Where the effect of the time value of money is material, non-current liabilities are measured at the present value of the expenditure expected to be required to settle the obligation. The present value measurement is performed

using a pre-tax discount rate that reflects current market assessments of the time value of money and any risks specific to the liability. Where discounting is used, the increase in the non-current liability due to the passage of time is recognised under "Finance costs".

2021

Total

Amount payable

5,169

5,169

This caption corresponds mainly to the long-term portion of the exit tax due as a result of the election for the Biome building

to be included in assets taxed under the SIIC regime in December 2017. The €21 million tax liability is payable in four annual

instalments between 2018 and 2021 and has been discounted.

X – 2) Income tax expense

Accounting policy

The results of businesses subject to income tax are taxedat the standard rate. The Group entities that have elected to be taxed as an SIIC are not liable for income tax and the

number of companies for which deferred taxes arerecognised is therefore limited.

Current income tax expense for first-half 2020 amounted to €1,583 thousand (first-half 2019: €3,384 thousand) and mainly

concerned the Parholding tax group.

44

X – 3) Deferred taxes

Accounting policy

temporary differences between the book value of assets

and liabilities and their tax basis.

For businesses subject to income tax, deferred tax assets

and liabilities are recognised by the liability method for all

The election for taxation as an SIIC led to the elimination

and liabilities concern companies in

the Parholding

of the tax bases of the SIICs' assets used to calculate

sub-group that are not eligible for taxation as SIICs.

deferred taxes. The only remaining deferred tax assets

Deferred tax assets and liabilities are calculated for all

reduction in the corporate income tax rate from 33.33%

temporary differences using the tax rate that is expected

to 25%. If the criteria for applying either of the above rates

to apply to the period when the asset is realised or the

are not fulfilled, the tax rate at the period-end is used,

liability is settled, i.e., 25% following enactment of

i.e., 28%.

France's 2018 Finance Act providing

for a gradual

Statement of

Income

Statement of

(in thousands of euros)

financial position

Reclassifications

Equity

financial position

déclaration

31 December 2019

30 June 2020

Fair value adjustments to investment property

(191,297)

8,957

(182,340)

Adjustment of depreciation

(27,251)

(918)

(28,169)

Adjustment of property rentals

(1,281)

(911)

(2,192)

Capitalisation of interest expense and transaction

(521)

(521)

costs

Autre

(1,221)

33

(1,188)

Net

(221,571)

7,161

(214,410)

Of which deferred tax assets

Of which deferred tax liabilities

(221,571)

7,161

(214,410)

XI –

Off-Balance Sheet Commitments

XI – 1) Operations-related commitments

Guarantees

(in thousands of euros)

Total

Within 1 year

In 1 to 5 years

Beyond 5 years

Commitments given

Property guarantees

110

110

Commitments received

Guarantees received from tenants (including first demand

116,982

1,128

76,167

39,687

guarantees)

Other first demand guarantees

400

400

Guarantees received from suppliers

2,474

337

2,137

Total commitments received

119,856

1,465

78,704

39,687

Contractual redevelopment and renovation obligations

At 30 June 2020, the Group's contractual commitments relating to investment properties undergoing renovation totalled €116,537 thousand (€67,256 thousand at 31 December 2019), of which €94,921 thousand concerned the Biome and 83 Marceau properties.

45

XI – 2) Off-balance sheet commitments related to financing

Standard mortgages

(in thousands of euros)

Compagnie

Pargal

Parchamps

Parhaus

Expiry date

16 July 2023

16 July 2023

16 July 2023

Total

Principal

32,000

15,000

22,333

69,333

Registered by Deutsche

Costs and

2,240

1,050

1,563

4,853

Hypothekenbank

incidentals

Total

34,240

16,050

23,896

74,186

Principal

32,000

15,000

22,333

69,333

Registered by Natixis

Costs and

2,240

1,050

1,563

4,853

incidentals

Total

34,240

16,050

23,896

74,186

Principal

32,000

15,000

22,333

69,333

Registered by Deka

Costs and

2,240

1,050

1,563

4,853

incidentals

Total

34,240

16,050

23,896

74,186

Total

102,720

48,150

71,688

222,558

Undrawn confirmed lines of credit

(in thousands of euros)

Total

Within 1 year

In 1 to 5 years

Beyond

5 années

BECM

150,000

150,000

BNP Paribas 2020

150,000

150,000

BNPP 2019 syndicated loan

390,000

390,000

Banque Postale

75,000

75,000

Société Générale

100,000

100,000

Cadif

175,000

175,000

Total

1,040,000

1,040,000

XI – 3) Employee-related commitments

Two employees (including one person who is also an officer of the Company) are entitled to compensation if they resign or are dismissed as a result of a major change in the scope of their responsibilities following a significant direct or indirect change in the shareholder base of SFL or its controlling company.

One officer of the Company who is not an employee is entitled to compensation for loss of office in the event that he is dismissed from his position for reasons other than gross or wilful misconduct.

At 30 June 2020, total commitments for the payment of compensation amounted to €3,422 thousand.

The terms and conditions related to this compensation

were approved

par

SFL's

Planche

of Directors

sur

9 February 2004,

25

juillet

2006, 4

April 2008

et

27 January 2015.

No related provisions have been recorded in the financial statements.

XII – Note to the Statement of Cash Flows

(in thousands of euros)

30 June 2020

30 June 2019

Acquisitions of and improvements to investment property

Travail

(50,269)

(23,896)

Total

(50,269)

(23,896)

Cash and cash equivalents at end of period

Cash at bank and in hand

270,028

42,972

Total

270,028

42,972

The amount reported in first-half 2020 for improvements to investment properties included €22,199 thousand in long-term prepayments in respect of redevelopment work on the Biome building.

Non-cash changes in bonds and bank borrowings amounted to €1,412 thousand in first-half 2020 and corresponded to the deferred recognition of debt arranging fees.

The impact of deferring recognition of rent-free periods is included in "Cash flow" along with additions to and reversals of provisions for impairment of trade receivables.

XIII – Scope of Consolidation

Consolidated companies

Registration no.

Percentage (%)

Interest

Voting rights

Parent company

SA Société Foncière Lyonnaise

552 040 982

Fully consolidated companies

SA SEGPIM

326 226 032

100

100

SAS Locaparis

342 234 788

100

100

SAS Maud

444 310 247

100

100

SAS Parholding

404 961 351

50

50

SC Parchamps

410 233 498

50

50

SC Pargal

428 113 989

50

50

SC Parhaus

405 052 168

50

50

SAS SB2

444 318 398

100

100

SAS SB3

444 318 547

100

100

SCI SB3

444 425 250

100

100

SCI 103 Grenelle

440 960 276

100

100

SCI Paul Cézanne

438 339 327

100

100

SCI Washington

432 513 299

66

66

SNC Condorcet Holding

808 013 890

100

100

SNC Condorcet Propco

537 505 414

100

100

Shareholders' pacts give the Group exclusive control over four companies that are 50%-owned. Accordingly, all subsidiaries are controlled exclusively and fully consolidated.

Société Foncière Lyonnaise is a fully consolidated subsidiary of Spanish company Inmobiliaria Colonial SOCIMI, SA, which owned 81.7% of the capital at 30 June 2020. The Group and all of its subsidiaries have their registered office in the 8th arrondissement of Paris.

47

4.

Société Foncière Lyonnaise

Société Anonyme

42, rue Washington 75008 Paris France

___________________________________

Statutory Auditors' review report on the 2020 interim financial information

Six months ended 30 June 2020

48

PricewaterhouseCoopers Audit

Deloitte & Associés

63, rue de Villiers

6, place de la Pyramide

92200 Neuilly-sur-Seine

92908 Paris-La-Défense

S.A.S au capital de 2 510 460 €

S.A.S au capital de 2 188 160 €

672 006 483 RCS Nanterre

572 028 041 R.C.S. Nanterre

Commissaire aux Comptes

Commissaire aux Comptes

Membre de la compagnie

Membre de la compagnie

régionale de Versailles

régionale de Versailles

Société Foncière Lyonnaise

Société Anonyme

42, rue Washington 75008 Paris France

_______________________________

Statutory Auditors' review report on the 2020 interim financial information

Six months ended 30 June 2020

_______________________________

This is a free translation into English of the Statutory Auditors' review report issued in French and is provided solely for the convenience of English speaking readers. This report should be read in conjunction with, and construed in accordance with, French law and professional auditing standards applicable in France.

To the shareholders,

In compliance with the assignment entrusted to us by your Annual General Meeting and in accordance with the requirements of article L. 451-1-2 III of the French Monetary and Financial Code (Code monétaire et financier), we hereby report to you on:

  • the review of the accompanying interim consolidated financial statements of Société Foncière Lyonnaise for the six months ended 30 June 2020;
  • the verification of the information contained in the interim management report.

These interim consolidated financial statements are the responsibility of the Board of Directors, and were prepared on 28 July 2020 based on the information available as of

49

this date given the changing context of the Covid-19 crisis and the challenges faced in assessing its impacts and future outlook. Our role is to express a conclusion on these financial statements based on our review.

Conclusion on the financial statements

We conducted our review in accordance with professional standards applicable in France. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with professional standards applicable in France and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim consolidated financial statements do not give a true and fair view of the assets and liabilities and of the financial position of the Group as at 30 June 2019, and of the results of its operations for the six-month period then ended, in accordance with IFRSs as adopted by the European Union.

Specific verification

We have also verified the information given in the interim management report prepared as at 28 July 2020 on the interim consolidated financial statements subject to our review. We have no matters to report as to its fair presentation and its consistency with the interim consolidated financial statements.

Neuilly-sur-Seine and Paris-La Défense, 28 July 2020

The Statutory Auditors

PricewaterhouseCoopers Audit

Deloitte & Associés

Lionel Lepetit

Laure Silvestre-Siaz

50

5. STATEMENT BY THE PERSON RESPONSIBLE FOR THE INTERIM FINANCIAL REPORT

I hereby declare that, to the best of my knowledge, the consolidated financial statements for the six months ended 30 June 2020 have been prepared in accordance with the applicable accounting standards and give a true and fair view of the assets and liabilities, financial position and results of the Company and the entities included in the scope of consolidation, and the interim management report on page 3 presents fairly the changes in business, results and financial position of the Company and the entities included in the scope of consolidation, as well as a description of their principal risks and contingencies for the remaining six months of the year.

Paris, 28 July 2020

Nicolas Reynaud

Directeur Général

SFL

42 rue Washington – 75008 Paris, France – T +33 (0)1 42 97 27 00 – www.fonciere-lyonnaise.com

SA au capital de 93 057 948 euros – RCS 552 040 982 Paris – Code APE 6820B – Nº TVA INTRACOM. SFL FR 54/552/040/982

51

SFL

42 rue Washington – 75008 Paris – T +33 (0)1 42 97 27 00 – www.fonciere-lyonnaise.com

SA au capital de 93 057 948 euros – RCS 552 040 982 Paris – Code APE 6820B – Nº TVA INTRACOM. SFL FR 54/552/040/982

Avertissement

SFL – Société Foncière Lyonnaise SA publié ce contenu sur 28 July 2020 et est seul responsable des informations qui y sont contenues. Distribué par Public, non édité et inchangé, sur 31 July 2020 09:11:04 UTC

All news about SOCIT FONCIRE LYONNAISE

Sales 2020 197 M
235 M
235 M
Net income 2020 199 M
238 M
238 M
Net Debt 2020 1 747 M
2 087 M
2 087 M
P/E ratio 2020 15,7x
Yield 2020 3,92%
Capitalization 3 133 M
3 735 M
3 743 M
EV / Sales 2020 24,8x
EV / Sales 2021 23,9x
Nbr of Employees 76
Free-Float 4,50%

Chart SOCIT FONCIRE LYONNAISE

Duration :

Period :

Soci

Technical analysis trends SOCIT FONCIRE LYONNAISE

Short Term Mid-Term Long Term
Trends Neutral Neutral Neutral

Income Statement Evolution

Consensus

Sell

Buy

Mean consensus HOLD
Number of Analysts 2
Average target price

71,50 €

Last Close Price

67,60 €

Spread / Highest target 18,3%
Spread / Average Target 5,77%
Spread / Lowest Target -6,80%

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