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Macro Location Analysis
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Loan To value
The project consists of the purchase and resale of commercial premises located at 15-17 Quai de l’Oise – 75019 Paris.
The operator, SAM INVEST, is seeking to acquire a 575 m² GFA premises (634 m² in total), via a memorandum of understanding with the former tenant of the premises who pre-empted the property.
Here is how the operation will proceed:
1. The former tenant DOMUS will purchase the property with a loan from SAM INVEST;
2. At the same time DOMUS sells the property to SAM INVEST, in return for an eviction allowance;
3. At the same time, the deed of assignment of the mortgage to the investors, represented by RAIZERS, is signed.
It should be noted that the notary in charge of the operation will only proceed with the transfer of funds if the three preceding points are validated. There will therefore be no movement if there is only one validated operation.
The operator is therefore buying a premises free of all occupants. He has found two tenants whose lease agreements have been signed, providing for entry into the premises between 15 and 30 August 2021, for a total rent of €280,000 per annum (excluding taxes and charges). It should be noted that a deductible of 6 months' rent is provided for the premises rented by DELI INTERNATIONAL and 3 months for FLINK. These are two home shopping delivery brands, an activity that has been expanding rapidly since the covid crisis. The operator will therefore only receive rent from November 2021.
Several estimates have been made by the operator:
* A Cushman & Wakefield estimate, vacant premises, values the property at €3,800,000. It should be noted that this estimate mentions a rent (market price) of €285,754/year
* An estimate by Iburoshop puts the value of the property at between €7,027,000 and €8,110,000 (taking into account a capitalisation method, with rates of between 4.25% and 4.5%) on the basis of draft leases obtained by the operator
The project is carried out by Mr Samuel SCIALOM through SAM INVEST. Mr. SCIALOM has carried out several property operations in the Lyon and Paris sectors. The operator recently started his real estate activity following the sale of his former company specialising in business consultancy, particularly on the subject of ecological transition and energy saving.
The asset has already received several expressions of interest, including a firm one that would allow the operator to repay the loan early while maintaining a comfortable profitability. To date, the offer has not been countersigned, as SAM INVEST wishes to leave itself room for manoeuvre in the commercialisation of the property.
Zoom on the program
Estimated resale turnover :
*Only commercial surfaces are taken into account (excluding car parks)
According to the "Spotlight Investissement France T1 2021" study, carried out by Savills (Source PDF), the rate of return on retail premises in a prime sector in Paris has changed over the period from 2.50% to 3% in 2020. This rate has remained stable over the beginning of 2021. The 3% rate is supported by a study conducted by CBRE.
Even if the property under consideration is not strictly speaking in a prime sector, the sector is still very attractive, located near several metro lines and facing the Ourcq canal. As the sale price is based on the yield of the asset (and therefore on the rents generated by the property), the exit price, with a yield of 5.50%, seems prudent given the sector.
With the rents obtained by the operator on the asset, the minimum return necessary to cover the entire cost price (rents/total cost price) would be 6.47%, i.e. almost twice the return expected on this type of asset located in a similar sector according to the CBRE study. The operator's turnover forecast in the balance sheet therefore seems conservative, with a capitalisation rate of 5.50%.
Two estimates were requested by the operator for this operation. The first, carried out by Cushman&Wakefield, estimated the property at €3,800,000, vacant premises, using the comparable method. This valuation, without using a capitalisation rate, estimates rents at €285,754 per annum for the property as a whole, which is extremely close to the leases obtained by the operator. A second estimate, carried out by Iburoshop, values the property by the capitalisation method, with rents of between €316,250 and €345,000 per annum and a capitalisation rate of between 4.25% and 4.5%, between €7,027,000 and €8,110,000. Again, the operator has chosen to be cautious with this estimate and the proposed rents are below Iburoshop's projections.
Estimate by capitalisation (with rents in line with the lease agreements, i.e. €280,000/year excluding VAT and charges):
Commercial rental market :
Prices are very disparate in the commercial market, including within the 19th arrondissement, due to the dependence of the location (high traffic area, street corner, etc.) and the size of the shop window in the commercial property market. However, the rents proposed by the operator appear to be consistent, as the property is located on a street corner with a large shop window. Also, the property is located on a busy street, the canal de l'Ourcq, with many passers-by, and the rue de l'Aisne (which extends to the rue de l'Ourcq) offers many shops and places to live. Also, opposite the building are several barges, including the Nez Rouge, the oldest sailing theatre boat in France, which provides a natural flow of passers-by and good visibility.
It should be noted that pedestrian traffic is less important for the type of activity of the future tenants (home shopping delivery) than for traditional businesses. The objective for these companies is to create a tightly woven network of premises in order to be as close as possible to customers, particularly in this sector of activity, which promises deliveries in 10-15 minutes, which necessarily requires the deployment of numerous premises in Paris to reduce the distances between customers and goods as much as possible. For example, by the end of 2021, FLINK plans to open 50 French locations, including 20 in Paris.
Overall, the product proposed by the operator appears to be consistent both in terms of the rents offered and the exit price with the capitalisation method, given the target sought by SAM INVEST, namely an investor.
The property is located on the ground floor of 15-17 Quai de l'Oise, at the corner of Rue de l'Aisne, in the 19th arrondissement of Paris, in the Villette district. It faces the Ourcq Canal and has a long stretch of the Quai de l'Oise, offering a clear view of the canal and its barges.
The address is well served by transport, with the Crimée station (line 7) less than 500 metres away, the Ourcq station (line 5) 500 metres away and located at the foot of a bus stop (lines 60 and 71 - Canal de l'Ourcq stop). In addition to the transport links, the property is located at the foot of a cycle path that connects to the major network developed by the city of Paris, allowing access to the operation.
The district is renowned for its liveliness, its vegetation (for a Parisian district), its range of local shops/services/cultural venues and its sports facilities (numerous parks in the vicinity, infrastructures, etc.). Property prices (housing) are low compared to the rest of the capital, with an average price of €9,289/m².
Zoom on the tenants
DELI INTERNATIONAL: a company created in 2021, with a capital of 510,000 €, is a subsidiary specialised in home shopping delivery, from the YANDEX group. YANDEX is a Russian company created in 1997, listed on the NASDAQ ($70.88 on 12 July 2021 - +0.62%). It has a market capitalisation of $25.14 billion and 2020 revenues of $218.34 billion ($25.51 billion in net income). The company has developed the most popular search engine in Russia (62% of the Russian market share). The company has made several agreements, notably with MOZILLA FIREFOX and MICROSOFT, to offer the default search engine on both browsers. The company has developed in various sectors throughout Europe, in the image of UBER, particularly in taxi services, race delivery, etc. This lease is part of the company's development policy in Europe, particularly in France.
FLIVERY FLINK: company, French subsidiary of the FLINK group, created in 2021 and with a capital of 25 500 €. A young German company, FLINK is a company offering bicycle shopping delivery services in 10-15 minutes, with a particular focus on organic, local and seasonal products. The sector has developed considerably in recent years, particularly due to the health situation. The company, which is the fastest growing in Europe (50 shops opened in 4 months across Europe), is expanding into France in early 2021. To support its development, the company has entered into a partnership with the German retail giant REWE (3rd in Europe in 2004, behind Carrefour and Tesco - 16th worldwide in 2021). FLINK also raised $240 million from international investors in early June 2021, in addition to the $50 million raised in March 2021, to provide the financial resources to support its ambitions. The global home shopping delivery market is estimated to be worth €300 billion over the next few years.
The leases signed by the two companies are firm leases, on a 3/6/9 year model for DELI INTERNATIONAL and 6 years firm for FLIVERY FLINK. Several guarantees are provided by the tenants, in particular a First Demand Guarantee equivalent to six months' rent, a security deposit equivalent to three months' rent for FLINK and six months' rent for YANDEX. These elements are reassuring and contribute to the solidity of the leases signed by the tenants.
The operation is being carried out by SAM INVEST, with a capital of EUR 300,000, registered in the Lyon Trade and Companies Register under number 852 148 279, on 04/07/2019.
SAS SAM INVEST, which is carrying out the Paris 19 - Quai de l'Oise operation, is wholly owned by its parent company, SARL ADAR, which in turn is wholly owned by Mr Samuel SCIALOM.
The bond will be issued by SAS SAM INVEST at an annual rate of 10% per year, for a term of 24 months. The bond will be amortised and repaid over the course of sales by the operator, with interest paid annually, but guaranteed for a minimum period of 6 months.
In order to provide additional guarantees, the repayment of the bond is secured by :
* A 1st rank mortgage in favour of Raizers representing the bondholders' mass;
* Notarised personal guarantee by Samuel SCIALOM.
The bond contract provides for early repayment if:
* Leases signed that do not comply with the forecasts provided.
All the documents associated with this fundraising are available in the "documentation" tab.
First rank mortgage :
* Loan to Value (Loan/turnover) : 66 %
* Loan to Cost (Loan / Cost of Ownership) : 80 %
* Loan to Acquisition (Loan / Acquisition cost) : 124 %
Mr. Samuel SCIALOM, 38 years old, of French nationality, is the founding director of SAM INVEST and ADAR. After having carried out several operations on a personal basis, he recently decided to make it his main activity after a career in advising companies on optimising their energy expenditure. It was the resale of his former company that enabled him to inject substantial equity into his operations. Mr SCIALOM has successfully completed 5 operations in the Lyon and Paris areas. This is the first operation of this scale. Mr. Scialom relies on his extensive network to carry out his operations, and he is confident in the liquidity of this Quai de l'Oise asset.
Balance sheet SAS SAM INVEST
Income statement SAM INVEST
Balance sheet SARL ADAR
Income statement SARL ADAR