Affine To Help Investor Transparency

PARIS-French property group Affine, one of the older listed firms which converted early to REIT status soon after introduction of the SIIC regime in 2003, is undertaking a major re-focus on investment, cutting back on development and non-core activities to bring more clarity for its shareholder base.

CEO and founder Maryse Aulagnon and Deputy CEO Alain Chaussard told PIE in an interview that the move was partly prompted by a massive drop in the Affine share price amid the global financial crisis. Even though this came in parallel with most of the European listed sector, it brought home the key importance of strategy and portfolio transparency.

“One way or another, we are dramatically decreasing the non-property business either by selling or winding up firms in that part of the business,” says Chaussard. “Within Affine there will be just property groups–Affine, the listed holding company, Affiparis which holds our Paris investments, and Banimmo which contains assets in Belgium, with a few also located within France. We will dramatically reduce the weight of development, and re-centre our business.”

Affine posted a 17.6% increase in net rental income in the first half, nearly doubled operating income, but made a 13% asset depreciation compared to end-December, bringing net asset value per share in at just over €30, compared to its share price last trading around €18. The group, which owns total gross assets of €1.147 billion, including transfer taxes, this year embarked on its new strategy of improving yields, tenant relationships and cost controls–as well as discontinuance of non-core activities, specifically development.

The shift back toward the investment core is the biggest change for Affine since its creation. Because the holding owns a Bank of France license to issue financial leases (creditbail), it combines this with investment in rental properties, and has 65% equity in AffiParis which focuses on Parisian commercial building, and 50% in the Belgian Banimmo, which specialises in repositioning Belgian and French assets. Development and engineering firms in the structure such as Concerto and Promaffine, will be wound down or repositioned.

“Before the crisis hit we were up to a share price of €45 and once the crisis struck we went down to €7.3 at the bottom, and this really brought the need for clarity and transparency home to us,” says Aulagnon. “It was partially our fault because we are a small company, and when you go from a capitalisation of €450 million to less than €100 million nobody bothers any more to look at what is inside. It’s just too complicated, particularly for big investing institutions.”

The Paris-based Affine has resumed investment, and has also sold smaller assets. At the end of 2008 it acquired property in Nevers in the centre of France, in March in Arcachon on the Atlantic coast, and is currently looking at an asset in the northern French town of Lille and one in the southeast.

Chaussard says, “Our portfolio was a little bit under-weighted in retail; normally, we stick to our balanced breakdown between office, warehouses and retail, and retail was a little too small so we are for the time being are focusing mainly on that segment.”

For the full interview published in PIE 137, available click: www.pfeurope.eu.