ANF Immobilier: Annual Growth Target of +10% of EPRA Recurring Net Income, Group Share Confirmed

Regulatory News:

ANF Immobilier (Paris:ANF) revenues were €38.3 million for the third quarter of 2016. They were €36.3 million as at September 30, 2015. This +6% increase based on IFRS standards reflects rigorous asset rotation and high-yield developments over the rolling year. The real estate company's rents, Group share and on a like-for-like basis, are stable with a negative change of less than one percent.

Rental income now breaks down into 54% from offices, 17% from retail, 13% from residential and 13% from hotels with the remainder comprising other types of land use, mainly parking lots. Commercial real estate leases thus account for 84% of income.

A constant and growing flow of new commercial projects

The +6% growth in consolidated income compared to the third quarter of 2015 is the result of three categories of commercial real estate transactions carried out in 2015 and 2016:

• The delivery in June 2015 of a 36,000 sq.m. office complex in the Carré de Soie district in Lyon, leased to Alstom (+€3.3 million);
• A high rate of hotel deliveries - since September 2015, three hotels in Marseille (two near the new Stade Vélodrome, and one at Euroméditerranée), a hotel in Bègles in the Bordeaux region and a hotel in Bobigny in the Paris region (+€1.7 million);
• The opening of stores - at the beginning of 2016, Nike and Maxi Bazar took over the former regional headquarters of Banque de France in Lyon, which was transformed into 2,500 sq.m. of retail space (+€0.6 million).

In all, these transactions total nearly 36,000 sq.m. of new office space leased, 2,500 sq.m. of ideally-located retail space in the heart of Lyon, plus over 600 hotel rooms, that is, €162 million in investments deployed (representing €106 million in Group share).

The trend is offset by two items related to historical assets:

• The disposal in November 2015 of a 13,000 sq.m. mixed property complex in Presqu’île in Lyon, primarily occupied by Printemps (-€2.2 million). This disposal illustrates the transformation of the real estate company via the disposal of mature assets with low yields and the reinvestment of the income from disposals in new properties with significantly higher yields.
• The property environment in Marseille (-€1.6 million) is primarily the result of a very high supply of local retail premises and of an unfavorable economic climate which impacts office space and residential properties (with the exception of furnished residential properties whose income increased by +12%). The new strategy, presented below, was established in March 2016 to address these points for each type of asset.

Summary

An aggressive strategy for Marseille to counter the economic climate

ANF Immobilier implemented its strategy for its retail premises at the beginning of 2016, anticipating a difficult economic climate and an oversupply of local retail space in Marseille. The real estate company envisioned two different approaches fitting the two distinct segments of Rue de la République: regarding the Vieux-Port segment, the goal is to set up stores for families and tourism; the second segment, connected to Place de la Joliette, is intended for services to accompany the growth of the Euromed district. The arrival of new stores like King Jouet (576 sq.m.), CopyTop (114 sq.m.), Le Cabanon (95 sq.m.) and TUI Store (100 sq.m.) in 2016 justified the choices made. This also pointed to the renewal of Rue de la République, aiming at a pedestrian traffic increase and a strategic differentiation.

With respect to residential property, in the short-term, work has been done to optimize rental charges and rent levels have been revised by apartment. The property management function was outsourced with a dedicated sales force and new show apartments. In the medium-term, infrastructure improvement is still planned via installations of high-quality public facilities (schools) in cooperation with the City of Marseille. It should be noted that furnished residential properties, located near the intersection of the Rue de la République and the Boulevard des Dames, have experienced a significant increase in occupancy with an impact of nearly +€0.2 million in rents compared to September 30, 2015.

With respect to office space, the success of the Euroméditerranée program, which has become a major business hub, has led to significant rental demand which benefits ANF Immobilier. In addition, the office space vacated by SNCM in 2016 located at the heart of Block 34 of the Euromed program was immediately 70% rented again, notably by the new Inter Entreprise Restaurant, which opened in August.

In Lyon: Growth prospects with Adely and a renewed pipeline

The Adecco-Adely transaction, involving an investment of €34 million and the development of 13,100 sq.m. of office space leased to Adecco in the Quartier du Carré de Soie in Lyon, was delivered at the end of September 2016. The investment was made in partnership with Crédit Agricole Assurances and DCB International and generates additional rental income of €2.5 million.

The real estate company casts a light on the fact that it increased the volume of its future transactions (pipeline) beyond 2019 with the Park View project in Lyon (formerly "Future Way - Tête d’Or") and the Rive Neuve project in Marseille. The two transactions total an additional €63 million, or nearly €25,000 sq.m. of additional new and ideally-located office space.

ANF Immobilier confirms its 10% growth target for EPRA recurring net income, Group share for 2016.

According to Renaud Haberkorn, Chairman of the Executive Board of ANF Immobilier, "ANF Immobilier is pursuing and achieving its transformation. It is strengthening its position as an investor and as a force for economic development with an impact in and on very dynamic regional metropolitan areas. The company's third quarter income reflects its goals."

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