Gecina secures a value creation operation at the heart of Paris’ CBD

Gecina is announcing that, on July 7, 2016, it signed a preliminary purchase agreement and a preliminary sales agreement with a French institutional operator for two buildings in Paris’ central business district (CBD), in connection with an asset exchange operation. Gecina has secured the acquisition of a 10,000 sq.m office building on Rue de Madrid with 114 parking spaces, as well as the sale of a mixed-used predominantly commercial building on Rue de la Bourse with nearly 5,000 sq.m of space. This operation is expected to be finalized in September 2016.

The building on Rue de Madrid (Paris 8th) for which Gecina has signed a preliminary purchase agreement for 63.8 million euros (including commissions and fees) is currently partially let and is expected to be vacated by the end of the year. The asset will then benefit from a redevelopment program, with delivery planned for 2019. Based on the assumptions retained at this stage, this operation is expected to generate a yield on cost of over 6.2%.

Alongside this, Gecina has signed a preliminary sales agreement for a fully occupied asset located on Rue de la Bourse (Paris 2nd), also in Paris’ CBD, for 56.0 million euros (including commissions and fees). This building, with nearly 5,000 sq.m of space, is made up primarily of offices (3,300 sq.m), as well as retail units and housing. Based on the price agreed on with the buyer, the loss of rental income for Gecina would represent less than 3.9%.

In this way, Gecina is securing the acquisition of an asset with strong value creation potential and the simultaneous sale of a mature asset at the heart of Paris. This operation will further strengthen Gecina’s value creation reserves through its project pipeline, in line with Gecina’s strategy for investing in the Paris Region’s most central sectors.

Based on current assumptions, the combination of these two operations would generate an IRR that is significantly higher than the Group’s targets, as well as a combined marginal yield on cost of around 8%.

On this operation, Gecina was advised by BNP Paribas Real Estate’s investment department and the notary’s office Wargny Katz.