Incorporated: 1959 as Groupement pour le Financement
de la Construction
Sales: EUR 263 million (FFr 1.72 billion) ($358.1 million) (2000)
Stock Exchanges: Euronext Paris
Ticker Symbol: GFC
NAIC: 531110 Real Estate Rental or Leasing of
Residential Building; 531311 Residential Property
Managers; 531312 Nonresidential Property Managers
Gecina SA is the leading real estate management company in France and one of the largest in Europe. The result of a series of mergers in the late 1990s, Gecina’s portfolio includes nearly two million square meters of office and residential space. More than 93 percent of the company’s properties are located in the Paris region; 70 percent of properties are residential, including a strong portfolio of prime Haussmann-era buildings. The company also owns the Carré Saint-Germain office and commercial complex, the renovation of which is expected to be completed in 2002 and feature 10,000 square meters of retail space for clients including The Nature Company, H&M, and Gap, and a 4,7000-square-meter single client office complex. The company’s portfolio, valued at EUR 4.7 billion, generated EUR 263 million in rental revenues, for net profits of EUR 107 million in 2000. Much of the company’s growth during the 1990s was guided by Eliane Sermondadaz, chairman and managing director, who stepped down at the end of June 2001. She has been succeeded by Antoine Jeancourt-Galignani. The company trades on the Euronext Paris stock exchange, but most of its stock is owned by just a few institutional shareholders, including its largest shareholder, Assurances Générales de France.
Real Estate Investments in the 1950s
The Groupement pour le Financement de la Construction (GFC) was established in 1959 in answer to a need for new rental housing in the Parisian area. The company assumed the status of a Société d’Investissement Immobilier, or SII, a category set up by the French government providing tax incentives in order to encourage the development of residential property in the French capital. The end of World War II and the economic boom years beginning in the 1950s as the French completed their postwar reconstruction found Paris with a steadily growing population—the capital was to become home to approximately one-quarter of the French population—and an extreme housing shortage. Exacerbating the housing shortage was legislation passed shortly after the war meant to protect renters from exploitation during the housing shortage. The new rent control laws, however, had the immediate effect of ending new housing construction.
The Parisian housing shortage, particularly among lower income properties, reached crisis proportions during the mid-1950s, especially during the severe winter of 1954, and the resulting outcry stimulated legislators to offer new incentives to stimulate housing construction. The late 1950s saw the creation of new classes of real estate companies, the Société Immobilières Conventionnée or SIC, directed especially to encourage construction of middle-income grade housing, and the Société d’Investissement Immobilier, or SII, which, in addition to offering tax advantages to offset losses incurred since the institution of rent control, allowed companies to go public and raise capital on the stock exchange. SIIs were, however, limited to the residential housing market.
GFC itself went public in 1963, and participated in a new building boom that was to transform much of the French capital, creating a huge new suburban ring, while, especially in the late 1960s after building codes were eased, adding large numbers of new—and modern—residential properties within Paris itself. These new buildings reached ten stories in height—doubling previous height restrictions—and often contained hundreds of apartments. The new class of building became highly sought after by the city’s rental customers. The tightening of building codes in 1977, coupled with a recession, brought a new lull to construction in the capital.
Parisian Real Estate Leader in the New Century
The late 1980s saw an intense yet brief construction boom that collapsed with a new recession at the beginning of the 1990s. The result was a glut of office space that continued to depress the real estate market throughout the decade and helped spark a consolidation of the Parisian real estate sector. GFC was to prove itself one of the strongest survivors of the period.
By the end of the 1980s, GFC had built up a strong portfolio of properties, valued at more than FFr 3.5 billion. The company nonetheless trailed behind its major SII competitors, including leaders Sefimeg, Simco, and UIF. The beginning of the new decade, however, proved a turning point in GFC’s growth. With the downturn in the real estate market and the perspective of changes to the SII legislation expected in 1993, GFC went looking for a new partner. In 1991, the company announced it had agreed to merge with another SU, Groupement Français pour l’Investissement Immobilier (GFII). This group had been seeking to restructure its own portfolio, then valued at FFr 3 billion. In the early 1990s, GFII had taken steps to build up its assets in Paris and the surrounding area, which then represented 50 percent of its portfolio, while reducing its holdings in Lyon, which accounted for 30 percent of its portfolio, and in the north of France, which had represented the remaining 20 percent of its assets. Both GFC and GFII already shared a principal investor, Assurances Générales de France (AGF), which became the combined group’s largest shareholder with some 25 percent of GFC’s shares.
The merger with GFII launched GFC into the top five of France’s publicly quoted SIIs. The company’s newly enlarged portfolio gave it the financial clout to begin acquiring new properties. GFC now adopted a policy of restructuring its portfolio to emphasis high-quality properties in Paris, selling off its provincial holdings and reducing its stake in the Lyon market. The company also began to look at shifting the balance of commercial and rental properties in its holdings.
The company shed its SII status in 1993, as it brought on a new chairman, Eliane Sermondadaz, who came to GFC from AGF and who was to guide the company’s growth throughout the decade, transforming it into one of the top real estate companies in Europe. The continuing depression in the building market enabled the company to build up its portfolio, particularly as a number of banks, insurance companies, and other financial institutions, which previously had invested in real estate, began selling off their property portfolios at discount rates. By 1996, the company’s portfolio neared a value of FFr 5 billion, generating revenues of more than FFr 363 million.
The late 1990s, however, provided still greater opportunities for growth. The bottoming out of the property market cycle, coupled with dropping interest rates, enabled GFC to seek to expand its real estate empire. Part of GFC’s new growth drive came from a need to gain size in order to compete against the growing numbers of foreign investors entering the Parisian market. At the same time, GFC was beginning to seek international investors to balance out its major shareholders, including longtime leading shareholder AGF.
In 1997, the company made the first of a series of acquisitions that propelled it into the top rank among Paris’s real estate companies, acquiring Foncina, an SII, which added another FFr 1.4 billion in property value to GFC. As Sermondadaz told La Tribune: “At the end of 1996, we were at the cycle’s low point. The company was tempting, with very beautiful buildings, very well maintained.” The Foncina acquisition was in keeping with the company’s determination not only to gain size, but also to balance its portfolio of properties among the high-end Hauss-mann-style buildings, dating from the 19th century, 1970s-era apartment complexes, and modern residential space. The company also began to eye reducing its reliance on residential properties. Following the Foncina acquisition, the company established Fongicef, a new sales and marketing subsidiary for its commercial and residential properties.
Now with assets topping EUR 1 billion, GFC looked for new acquisition targets. The company struck hard in 1998, doubling its size after acquiring UIF (Union Immobilier de France) and La Foncière Vendôme. These purchases boosted the worth of GFC’s portfolio to more than FFr 12 billion, and reinforced the share of Parisian properties, which now accounted for 71 percent of its properties and 84 percent of its rental revenues. The two acquisitions added nearly 400,000 square meters of prime Parisian real estate, and especially a strong group of Hauss-mann-style buildings. The purchases also enabled GFC to increase its position in the commercial sector, reducing its proportion of residential properties to just 75 percent of its total assets. The company’s new stature—it now placed second in the Parisian market, behind Simco—led it to change its name to Gecina at the end of 1998.
“After the merger with UIF, Sefimeg’s portfolio corresponded exactly with the strategy that we had fixed for ourselves,” Sermondadaz told Les Echos when describing Gecina’s reasons for acquiring longtime rival Sefimeg in 1999, “It’s principally situated in Paris. It has high quality. Finally, it will enable us to maintain a balanced ratio of residential and office space. When the operation is completed, 70 percent of Gecina’s portfolio will be composed of apartments, and 30 percent of offices, in terms of surface area. But in terms of rent, the ratio will be more like 60-40.” The company completed its acquisition of Sefimeg, which had been part of French financier François Pinault’s Atresia, in July 1999, boosting its total floor space to more than 1.8 million square meters.
Gecina’s ongoing expansion relies on an active switching and enhancement policy, a consistently high standard of rental services, coupled with a sound acquisition growth strategy .
One month later, it announced its intention to acquire Immobilier Batibail, a move completed in December 1999. The acquisition of Batibail, coupled with that of Sefimeg, helped Gecina close the year with double the assets over the year before. The group now boasted a portfolio valued at more than FFr 26.5 billion (EUR 4.1 billion), while continuing to reinforce the company’s strategy of focusing on the Parisian market. More than 87 percent of the company’s properties were now located within the Paris area. The Batibail acquisition had also boosted the proportion of Haussmann buildings, accounting for 23 percent of floor space, while commercial property topped 36 percent of the company’s portfolio. At the same time, Gecina had captured the leadership position in the Parisian real estate market.
In 2000, Gecina acquired a new prime property, the Carré Saint-Germain complex in Paris’s prestigious sixth arrondissement. The company immediately launched a massive conversion program on the property, creating 10,000 square meters of retail space and a 4,700-square-meter single-client office complex, to be completed by 2002.
Yet the rise of interest rates and the upswing in the property cycle spelled a temporary end to the company’s acquisition spree. Instead, Gecina concentrated on absorbing its new properties and operations, including instituting a vast restructuring program. The company’s acquisitions had swelled the ranks of its subsidiaries to more than 50 companies, many of which controlled only single properties. Gecina therefore began trimming the ranks of subsidiaries, merging the various entities into a more manageable—and less costly—handful of primary subsidiaries. Meanwhile, the company launched a restructuring of its portfolio as well, planning to sell off as much as EUR 1 billion in assets, including a complete sell-off of all of its remaining provincial properties other than in Lyon.
By mid-2001, Gecina was able to begin looking for clients for its Carré Saint Germain project, quickly finding such notable retail tenants as H&M, Fnac, The Nature Company, and Gap. The company was also looking forward to turning over the project’s office spaces to its new tenant—who was expected to pay as much as FFr 5,000 per square meter per year. On a total investment of FFr 750 million, Gecina hoped to make a profit of some 7.5 percent.
After leading the company’s expansion, Eliane Sermondadaz stepped down from her position as chairman at the end of June 2001. The company appointed in her place Antoine Jeancourt-Galignani, who in turn named former Banque Worms chief Serge Gryzbowski as the new Gecina CEO. As the company completed its restructuring, and began enjoying the fruits of its new heavyweight status, it looked forward to capturing a still larger share of the Parisian real estate market.
SAS Fc Transactions; SAS Foncière De La Cité; SAS Geciter; Investibail; La Foncière Vendôme; La Fourmi Immobilier.
Assurances Générales de France; American International Group, Inc.; Bail Investissement S.A.; British Land Plc; Capital Shopping Centres Plc; CB Richard Ellis Services, Inc.; Credit Suisse First Boston; Foncière Euris S.A.; La Fourmi Immobilière SA; La Fourmi Immobilière SA; Interbail SA; Klépierre S.A.; Société Foncière Lyonnaise S.A.; Peel Holdings plc; Société Immobilier de Location pour l’Industrie et le Commerce (SILIC) ; Simco SA; U.I.S. Percier Group; Unibail SA; Wates City of London Properties.
- Groupement pour le Financement de la Construction (GFC) is created.
- GFC goes public.
- Company acquires Groupement Français pour l’Investissement Immobilier (GFII) .
- GFC converts from a Société d’Investissement Immobilier (SII) structure, which had restricted it to residential property investments.
- Company purchases Foncina, heightening its stature among Paris real estate companies; company establishes Fongicef, a new sales and marketing subsidiary for its commercial and residential properties.
- Company, now second in the Paris real estate market, renames itself Gecina SA.
- Gecina acquires Immobilier Batibail and Sefimeg, doubling its assets of the previous year and propelling it into the leadership position in the Parisian real estate market.
- Eliane Sermondadaz, responsible for much of the company’s growth during the 1990s, steps down as chairman and managing director, replaced by Antoine Jeancourt-Galignani.
Besses-Boumard, Pascale, “Cinq questions ‘a … Eliane Sermondadaz,” Les Echos, May 20, 1999, p. 53.
——, “Rebaptisée Gecina, la société GFC se hisse au deuxième rang français des foncières,” Les Echos, November 6, 1998 p. 20.
Cohen-Chabaud, Michèle, “Les habits neufs des foncières françaises,” La Tribune, January 25, 2000.
de Vaublanc, Aude, “Gecina lance la commercialisation du Carré Saint-Germain,” La Tribune, March 15, 2001.
Rowe, Michael, “Investors Flock to Paris,” European, March 13, 1997, p. 26.
—M. L. Cohen