French REIT Gecina has posted higher-than-expected earnings of €363.5 mln in 2017, largely due to the buoyancy of the Parisian office market and the successful integration of Paris-listed peer Eurosic.
The gecina result represents a 4.6% increase on the previous year, with the company forecasting an increase in earnings of between 3 and 6% for this year.
The year 2017 was marked by the friendly takeover of Central Paris office owner Eurosic, which strengthened Gecina’s leadership position in the Central Parisian office market.
On the financing side, the transaction increased the group’s loan-to-value ratio from 29% previously to 42.4% at year-end 2017, although the company is committed to reducing it to a more moderate level in the medium term.
To accomplish a lower debt ratio, Gecina is implementing a programme to dispose of at least €1.2 bn and up to €2.2 bn of assets from the Eurosic and the Gecina portfolio.
Around €655 mln of disposals have so far been completed at an average premium of 12.5% to the latest appraisal values, in line with the group’s strong like-for-like portfolio value growth (11.8% during the year 2017).
Despite the higher debt ratio, the company was able to reduce its net financial expenses by 6.5% in 2017, mostly thanks to €2.2 bn worth of bond issuances over 2017 at a historic low margin of 1.3%, which helped reduce the group’s overall cost of debt from 2.2% at year-end 2016 to 1.7% a year later.
RESIDENTIAL BECOMES CORE
Gecina now sees its residential assets as part of its core portfolio and plans to retain it and expand it in the long term. It has already identified nearly €200 mln worth of investments in the sector, including €107 mln that are already committed. The sector currently represents 16% of its total portfolio, or a value of €3.2 bn, largely focused on the Western part of Paris.
CEO Méka Brunel says that the decision reflects a new strategy refocusing around urban office and living spaces. ‘Today, Gecina considers that its residential portfolio is aligned with the needs of new, more mobile and flexible lifestyles and the demand for central locations, and that retaining this portfolio is relevant to complement Gecina’s specialization in urban offices.’
Brunel, whose mandate has just been renewed for four more years, took the helm in January last year after nearly a decade as head of the European real estate business of Ivanhoe Cambridge, a Canadian pension fund and also the principal shareholder in Gecina.
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An interview with Gecina CEO Méka Brunel appears in the March 2018 edition of PropertyEU Magazine
