A tie-up with the Morgan Stanley Real Estate Fund has taken GSFR into asset management, but it also continues its investment focus on French provincial markets
The majority of large institutional investors in French real estate concentrate their portfolios on Paris. Garages Souterrains et Foncières des Regions (GSFR) – a 51% subsidiary of the French Batipart group – has elected to take exactly the opposite course and to focus its activities on the French provinces.
The company’s reasoning is straightforward. As Jean-Yves Klein, finance executive with GSFR at the group’s headquarters in Metz, eastern France, explains. “French regional markets are less volatile than the Paris markets. Moreover, returns are currently higher on French regional properties than on Paris real estate. This differential is likely to reduce with the introduction of the euro. Now is the time to invest in the French regions.”
Against the above background, GSFR is pursuing a two-pronged strategy. The longer established part of this is to expand the company’s property portfolio, particularly in offices and the residential sector. The company owns more than €303m (FFr2bn) of assets throughout France, with holdings in Metz, Strasbourg, Lyon, Toulouse, Bordeaux and Lille. In addition the company is looking at opportunities in Nantes. The more recent approach is to become a property asset manager, taking advantage of the trend among large French corporates to outsource their real estate holdings. To this effect, GSFR has formed a joint venture with the Morgan Stanley Real Estate Fund (MSREF). The jv’s first deal was a €533m purchase of a 60-building portfolio from French energy group EDF.
GSFR will manage properties acquired by the jv through a special purpose vehicle called BGA. Ownership of the properties will be vested in separate companies, with MSREF owning 80% and GSFR the remaining 20% in each case.
“According to some estimates, around FFr180bn to FFr200bn worth of French corporate property is likely to be outsourced over the next two to three years. In addition to EDF, other French companies that are interested in taking this route include France Télécom and La Poste,” says Klein.
“Few large French property companies have expertise in managing property assets outside the Paris region, yet many of the properties that French groups are thinking of divesting are situated in the provinces.” GSFR’s property portfolio comprises 52,000m2 of offices, 10,000m2 of warehouses, 123,000m2 of residential properties, and 1,200m2 of parking. GSFR plans to sell off non-strategic assets.
The company says it is following a policy of buying high-quality properties and divesting itself of marginal holdings to attract institutional investors. Since GSFR is free of debt, it is prepared to use leverage in making future acquisitions.
In January 2001, the company acquired a large package of properties from the AXA insurance group, comprising 965 residential units, and 42,523m2 of office space. At AXA’s request, the price was paid partly in GSFR shares. This deal more than doubled GSFR’s portfolio, largely contributing to a 52% increase in profits for the first half of 2001 to €3.4m.
“Our objective is to achieve a balance between offices and residential properties, investing on a long-term basis,” explains Klein. “We plan to speed up the pace of new acquisitions,” he adds. He also says that the company may consider making some acquisitions in Paris to balance the portfolio once the provincial portfolio has been sufficiently developed.
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Financial highlights |
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Profit was up almost one third |
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ALIGN=”CENTER”>2000 |
ALIGN=”CENTER”>1999 |
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€m |
FFrm |
€m |
FFrm |
|
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Turnover |
16.74 |
109.8 |
13.83 |
90.7 |
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Net profit |
4.48 |
29.4 |
3.40 |
22.3 |
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Source: GSFR |
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Garages Souterrains et Foncières des Régions
1 avenue Ney
57000 Metz
Tel 33 3 87 37 77 90
Fax 33 3 87 37 77 99
