Detail Descripton

Operation

The operation consists of the purchase and following works to optimize the rental yield, followed by the block sale of a building located in the heart of Paris, in the 9th arrondissement.

The building, a remarkable Haussmann-style building, is made up of a shop on the ground floor and offices on the upper floors. This building offers a very nice commercial area, with a 15-meter façade, 200 meters from Boulevard Haussmann and Place de l'Opéra. The shop is leased to a national brand. The offices are free of any occupant, except for 260 m², the eviction of which is under negotiation. The operator wished to vacate all the offices, notably in order to raise rents, which until now have been below market indicators, and thus increase the value of the building. In addition, the operator is carrying out renovation work on the office floors, in particular the replacement of a lift and the renovation of the building's facade.

The operation is carried by the Groupe Weiss. This experienced operator specializes in the purchase of commercial properties that are undervalued due to below-market rents and renegotiates these rents upwards in order to increase the value of the property for a target of investors seeking profitability.

An independent operator-investor established in Paris in 2007, the Weiss Group was founded by Julien Weiss, who created and developed the investment and property development activities. The structuring, implementation and management of real estate transactions and high value-added projects are the strengths of the Group's companies. Autonomous decision-making, responsiveness, the professionalism of partners, high standards and technical expertise are the cornerstones of the Group's philosophy, shared by its teams.

Asset details

The building, which includes 280 m² of retail space and 1,540 m² of offices, plus technical premises and archives, has a total surface area of 2,040 m². The operator intends to rent these areas at a total annual rent, excluding charges and taxes, of €1,327,104, i.e. €650/m²/year. This rental value enables the building to post an annual yield of 3%, which is consistent with the product and location.

The value shown here is based on the appraisal carried out by Expertises Galtier, an RICS-certified appraisal firm operating since 2007.

The appraisal concludes that this type of property, given its location, architectural quality and typology, is better suited to an investor clientele. The capitalization valuation is therefore the preferred valuation in this case.

The report also concludes that the rental value of the offices is €750/m²/year, whereas they were rented at around €405/m²/year.

It should be noted that, as the property has not yet been acquired by the operator, the latter wishes to remain discreet about the exact address of the transaction.  

Location

The building is located in Paris, in the 9th arrondissement, which enjoys a large employment area, mainly in the service sector, and a good economic and cultural appeal. The property is located 200 meters from the department stores on Boulevard Haussmann, making this district one of the busiest in the capital given the large retail offer. In addition, the district is home to the Opéra Garnier, which notably hosts the prestigious Opéra National de Paris.

The property is, therefore, part of the Opéra district, which is part of the renowned Central Business District, home to many companies and head offices. The district benefits from both tourist and economic attractions as well as a significant pedestrian flow, ideal for this type of property.

Due to its location, numerous public transport services, including the RER (lines A and E), the metro (lines 3, 7, 9, 12, 14) and numerous bus lines are nearby. In addition, the property is in direct proximity to the Saint-Lazare train station.

Although it is not directly located on Boulevard Haussmann, the building is still ideally situated and its location is a prime location for this type of property.

Expertise report synthesis

In view of the property under consideration, the capitalization valuation is used here and allows the property to be valued, after works, at €42,330,000. This valuation takes into account the current rent of the business, even if it is also below the market price. As regards the offices, in view of the location and quality of the property in question, the appraisal shows an average rental price of €750/m²/year excl VAT.

Furthermore, for the Paris CBD (Central Business District) sector, and more specifically in the privileged Opera district, which is one of the capital's "prime" districts, the market shows an average rate of return on tertiary leases of 3%. This 3% rate of return is similar to recent transactions that have taken place on similar properties and in comparable locations, particularly before the current sanitary period.

Examples of similar properties:

Provisional schedule

As a precautionary measure in view of the current situation, the operator wished to maintain a comfortable period of 24 months for the marketing of the property.

Legal arrangement

The transaction is being carried out by GROUPE WEISS HOLDING, with a capital of €4,733,000, registered with the Paris Trade and Companies Register under number 879 093 979 since 19 November 2019.

The dedicated operating company that carries out the transaction is 62.5% owned by its parent company, SAS GROUPE WEISS HOLDING, which will carry the bond issue, and 37.5% by a sleeping partner that has no operational role.

In order to comply with the regulatory provisions governing the bond issue, SAS GROUPE WEISS, wholly owned by Julien WEISS, will provide its First Demand Guarantee.

The bond loan will be issued by SAS GROUPE WEISS HOLDING at an annual rate of 10% per annum for a period of 36 months.

The bond loan will be repaid at the end of the project, interest will be paid at the end of the project and guaranteed for a minimum period of 6 months.

In order to provide additional guarantees, the repayment of the bond loan is guaranteed by:

* First Demand Guarantee from SAS GROUPE WEISS

* Personal guarantee from Mr. Julien WEISS

The bond contract provides for early redemption if:

* Marketed before the scheduled maturity date

All the documents associated with this fundraising are available in the "documentation" tab.

SWOT

Operation budget

The balance sheet shows a comfortable margin, which may leave it up to the operator to reduce turnover to speed up sales. This margin also allows the operator to reduce the rental value of the offices, which mechanically lowers the value of the property (as a reminder, the value of the property depends directly on the rental value of its component units, and in particular the offices, which are currently vacant). The rents included in turnover correspond to ground floor retail rents, which will continue to accrue for the duration of the transaction. No additional rent relating to offices has been taken into account, whereas the sale will take place once the premises are occupied, and therefore after the operator has received initial rents.

The break-even point has been reached at €34,088,816 in turnover, which would correspond, for an expected return of 3%, to an annual rent of €1,022,664, more than 30% lower than projected and market rents.

Financing structure

Shareholders presentation

Groupe Weiss:

Groupe Weiss is a company operating in several real estate businesses, namely development, management and investment. An independent player created in 2007, Groupe Weiss accounts for more than 100,000 m² of real estate throughout France, particularly in the Ile-de-France region in Prime sectors. It has several outstanding addresses in its portfolio, such as 151 Boulevard Saint-Germain (Paris 6ème), 7 Place de Valois (Paris 1er), 13 Boulevard de Italiens (Paris 2ème), 17 Place de la République (Paris 3ème), both office and residential, often with a commercial component on the ground floor. The group has specialized in high value-added transactions, in particular thanks to the expertise of its manager in the revaluation of rents for commercial premises.

Julien WEISS, 35 years old, French:

Julien WEISS, Chairman and Founder of the Weiss Group, has been carrying out operations throughout his group for 13 years.

In addition to this, Mr. Weiss has carried out more than 40 asset transactions through SCIs owned by himself, alone or with partners, intended to be operated over the long term and constituting the manager's assets.

Financial elements

 As Weiss Holding Group was created in December 2019, it has not yet produced any balance sheets.

Focus on the financial elements of the company giving its First Demand Guarantee

Balance sheet SAS Groupe Weiss

Income statement SAS Groupe Weiss

Track record - Julien Weiss with his different companies