Lyons real estate assets

At the heart of the old city

ANF Immobilier’s real estate assets in Lyon, located on Rue de la République, consist of high-quality Haussmann-style properties representing approximately 88,000m², with retail premises on the ground floor, and offices and residential units on the floors above.

The improvement in market conditions seen at the end of 2009 was confirmed in 2011. In fact, after particularly low quarterly levels of investment transactions of approximately 35,000m² during the first three quarters of 2009, volumes in 2010 exceeded 50,000m². Hence in 2010 the market recovered to its average level of transactions over the last five years. Moreover, although the current offer of new offices is roughly meeting current demand in the segment, the volume of construction starts for delivery in 2011 will be insufficient to meet demand for offices in the business districts (source: BNP Paribas Real Estate).

Prime rents for offices in 2011 increased from €250 to €260 per m² per year (excl. tax and charges) for the so-called “traditional” buildings (i.e. not including towers and unusual buildings) in the Central Business District and in the Presqu’île/Confluence area (where the two rivers meet). Average rents have maintained their level. Retail premises have resisted the crisis relatively well. Demand from retailers is recovering, even if they are showing a high level of prudence and selectivity in their choices of location. The best locations are subject to strong demand.
At the heart of the old City of Lyon, recognized in 1998 as a UNESCO World Heritage Site, Rue de la République is one of the main thoroughfares in the Presqu’île. It runs for 1 km from Place Bellecour to City Hall, and is one of the longest pedestrian streets in Europe.

It is well served by public transport and hosts a number of high-quality chains and shops, making it a particularly popular place during the day and at weekends. This atmosphere is enhanced by the presence of a large number of coffeehouses and restaurants, and also by major cultural venues (such as the Opéra, Musée Saint-Pierre and Théâtre des Célestins). With some 2,000 retail outlets, the Presqu’île area is the retail heart of the city of Lyon.

The Lyon properties

ANF Immobilier plans to maintain its assets in top quality condition. The entrance lobbies and stairwells of its buildings are regularly brought up to standard. In addition, ANF Immobilier has anticipated regulatory deadlines for the modernization and standardization of all of its elevators. Lastly, exterior renovation work has continued in collaboration with the Architecte des Bâtiments de France: 85% of the buildings in Lyon have been renovated since 2005.

The 338 residential apartments owned by ANF Immobilier (32,000m²) in Lyon are currently either rented or being renovated. There is no reserve of apartments on the market. ANF Immobilier has continued its program of renovating its residential premises. The average rent for the 98 apartments re-let in 2011 was €13.34 per m². Given market trends, at December 31, 2011, the Company estimates that there is potential for additional rental income of €0.9 million for almost 10,000m². ANF Immobilier pursued the creation of four new social housing units taking the total number delivered since 2005 to 31.

ANF has identified about 5,100m² of Mansard-style loft space that requires major renovation before being rented. This renovation should make it possible to create 119 apartments completed to be delivered between 2009 and 2012. This work is being carried out in close collaboration with the Architecte des Bâtiments de France, particularly concerning the restoration of the façades and roofing. These spaces did not previously generate any income. So far 93 apartments have already been delivered and rented at an average rent of €14.60/ m², higher than the market average.

The 26,000m² of ANF Immobilier’s office space benefited from strong demand in a very sought-after sector, with the unique setting of the Presqu’île having a positive impact on the rents. Many companies seek city-center locations in Haussmann-era properties to enhance their image and benefit from a dynamic business environment. The average area of the offices leased by ANF Immobilier in 2011 was 172m², mainly to self-employed professionals. Backed by this strong demand, market rents were maintained at around €200/m² (excl. tax and charges) for the renovated and non-air-conditioned offices and at around €260/m² (excluding taxes and charges) for renovated and air-conditioned offices. In 2011, 3,609m² of offices were negotiated in the context of 21 new leases. The average rent for new ANF Immobilier leases in 2011 was €227 perm² (excl. taxes and charges). Given market trends, at December 31, 2011, the Company estimates that there is potential for additional rental income of €0.5 million for almost 7,500m². A prime retail location in Lyon, the Rue de la République also enjoys very strong market demand for premises. There are no vacant units and the tenant replacement rate is very limited (1% on an annual basis).

For its 30,000m² of retail premises, ANF Immobilier has developed a replacement strategy aimed at attracting as many pedestrians to the area as possible. After a first Starbucks Café in 2007, a Monop’ in 2008, an Esprit and a second Starbucks Café, Desigual opened its first boutique in Lyon on the Presqu’île in 2010. Orange has also extended its shop floor by another 200 weighted useful square meters The Rue de la République, generating total annual sales revenue of €200 million, is the principal retail avenue of the Presqu’île, far ahead of the Rue Edouard Herriot and the Rue Victor Hugo (source: JLL and CBRE).

The legal proceedings to set the terms of the renewed lease for Le Printemps were resolved in 2011, in ANF Immobilier's favor. The judge set the annual rent at €2.4 million excluding taxes, which is six times higher than the previous rent of €400,000 per year. The retail sector has strong growth potential, and at December 31, 2011, the Company estimates that there is potential for additional rental income of €2.2 million for almost 10,400m². The market values of the Rue de la République range from €1,000 to €2,600/m² in zone A.

In 2012, ANF Immobilier will continue actively enhancing the attractiveness of the Rue de la République.