(AOF) – In the first quarter of 2024, Argan recorded rental income of 48.1 million euros, an increase of 6%. The sustained growth comes “mainly from the revision of rents (+4.6%) on January 1, 2024, supplemented by the full year effect of deliveries in 2023”, explains the French real estate company in the development and rental of warehouses. Argan specifies that it has a secure development volume of almost 180 million euros for 170,000 square meters in total, with an average yield approaching 7%.
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Key points
– Leading French real estate company for the development and rental of logistics platforms with a market share of 7%, created in 2000;
– Assets of 100 platforms, valued at €3.64 billion;
– Rental income of €166 million, distributed between shippers for 77%, multi-client logisticians for 18% and single-client logisticians for 5%;
– Business model for controlling the value chain: quality land reserve, role of developer-investor for manufacturer cost prices, offer of logistics platforms rented over the long term (+ 10 years) to quality tenants, with operating costs of less than 8% of rental income;
– Capital held 40% by the founding Le Lan family and 16.6% by Prédica, Jean-Claude Le Lan chairing the supervisory board of 8 members and Ronan Le Lan the management board of 3 members;
– Tight balance sheet with net debt of €1.8 billion giving an LTV ratio of 49% and mortgage ratio of 69%.
Challenges
– 2023-2024 strategy aimed at:
– annual growth of 10% per year,
– accelerated debt reduction:
– via the benefit of the mortgage nature of the debt (€100 million annual amortization), targeted asset sales at the end of 2024 and beginning of 2025 and, finally, the opening of a vehicle dedicated to third-party investors,
– targeting for 2030 an LTV of between 25% and 35% and a debt ratio of 7;
– “2023 Climate Plan” aiming for carbon neutrality in heating and lighting by 2030: climate plan from 2023 via:
– future “AutOnom” warehouses, producers of their own green energy via photovoltaic power plants, old sites being sold and replaced by AutOnom assets;
– total replacement of gas heating with electric heat pumps;
– History of regular progression of revenues and net profit;
– Residual lease term of 5.5 years and debt control, at a fixed rate of 58% and regular extension of the assets, by 3.5 million m2 at the end of June 2023.
Challenges
– Evolution of net assets per share, of €78.1 at the end of June 2023, to compare with the stock market price, and the warehouse occupancy rate (100%);
– Income sensitivity at Carrefour (29% of rental income), followed by FM Logistic (8%) and Casino (6%), with food distribution accounting for 41% of rents, ahead of logistics & transport (21%) and equipment the person (11%);
– Acceleration of development in 2024 – volume of 170,000 m2 for a value of €180 million – financed equally by amortizing mortgage loans and by sale of warehouses.
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A demand crisis
According to data from the Federation of Real Estate Developers (FPI), the figures for the third quarter of 2022 continue to be alarming. Sales of new collective housing fell by 12.4% over one year, to 19,006 units. Over the first nine months of 2022, the drop reached 10.2%, to 72,670 units.
Reservations are also plummeting due to the collapse of block sales to social landlords and institutional investors. With interest rates rising, institutional investors are renegotiating or halting operations. First-time buyers are penalized by the rise in rates and the tightening of the Pinel system puts off certain private investors.
Due to the sharp rise in construction costs, the FPI estimates that one in six authorized operations is ultimately not carried out for economic reasons.
Faced with this, prices are still rising: the sales prices of new collective housing increased by 5.9% across France in the third quarter of 2022. Ile-de-France is an exception, with a decrease of 0. 9%.