BNP PARIBAS REAL ESTATE GUIDE TO

Transcription

1 BNP PARIBAS REAL ESTATE GUIDE TO INVESTING IN PARIS 2017 INTERNATIONAL INVESTMENT Real Estate for a changing world

2 ABOUT BNP PARIBAS REAL ESTATE... BNP Paribas Real Estate is the market leader in commercial real estate services across Europe with 704 million of revenue, 155 million of net profit before tax and 3,900 employees. Developing 154,000 m² of office space delivered in Europe 178,500 m² under construction in Europe (as of January 1 st 2017) Buying, Selling, Renting Close to 3,850 transactions in commercial real estate One transaction every 18 minutes 19 billion investment volume transacted in commercial real estate 6.2 million m² of commercial real estate leasing transactions in KEY FIGURES Valuing 289 billion worth of assets valued 130 million m² valued Managing, Optimising 38 million m² managed in commercial real estate across Europe Investing, Valuing 24.1 billion of assets under management across Europe billion in one year

3 CONTENTS INTRODUCTION Main Paris business districts p.04 Foreword by Larry Young p.05 PARIS OVERVIEW Top 10 reasons to invest in Paris p.06 Main office markets p.08 Retail markets p.18 Logistics markets p.22 Hotel markets p.24 INVESTOR TOOLKIT Need to know: Key legal and technical terms p.26 Need to know: Acquisition p.30 Need to know: Letting p.32 Tax clinic p.34 THE GREATER PARIS PROJECT AND "INVENTING THE GREATER PARIS METROPOLIS" p.38 OUR INVESTMENT TEAMS p.42 Investing in Paris was edited by BNP Paribas Real Estate with the contribution of Baker McKenzie BNP Paribas Real Estate Simplifed joint stock company with capital of 383,071, RCS Nanterre Code NAF 4110B - CE identification number FR Headquarters 167, Quai de la Bataille de Stalingrad Issy-les-Moulineaux Cedex - Tel.: BNP Paribas Real Estate is part of the BNP Paribas Banking Group Non contractual document March copies - BNPPREI03 Front cover picture: / Certifié PEFC / pefc-france.org 3

4 INTRODUCTION MAIN PARIS BUSINESS DISTRICTS LA DÉFENSE NEUILLY/LEVALLOIS PARIS CBD ÉTOILE CLICHY ST. OUEN PARIS CBD OPÉRA ST.DENIS PLEYEL Office letting transactions over 1,000 m² in 2016 RUEIL- MALMAISON NANTERRE PRÉFECTURE NORTH EAST PARIS BOIS DE BOULOGNE BOIS DE VINCENNES BOULOGNE / ISSY-LES-MOULINEAUX RIVES DE SEINE BALARD MONTROUGE ARCUEIL PARIS TH DISTRICTS 4

5 FOREWORD BY LARRY YOUNG The city of lights Paris is a global city at the crossroads of Europe. It is an economic powerhouse, with the world s highest proportion of fortune 500 companies, but still retains its historic, beautiful routes being the world capital for fashion, culture and a tourist hotspot. The real estate market is one of the largest and most liquid in the world with an office market of over 55 million square meters. Paris is the worlds 5 th largest investment market and the largest in continental Europe. The office market is showing strong signs of recovery, and potential rental growth. The high end retail market is world famous with fierce competition from global brands for the best locations, and the city benefits from impressive shopping centres and department stores. The logistics market in the Paris suburbs forms part of the prime European hub, and has been transformed over the past years. From the 1980 s with the first major investments by the North American institutions and German funds, international investment has increased constantly in France. Middle- Eastern and Asian investors compete with us, the European and French investors who have always been strong in their home market. BNP Paribas Real Estate has an unrivaled track record in France with new comers and experienced investors. This guide outlines the top ten reasons to invest in Paris as well as statistics on the market. With the legal and tax experts Baker McKenzie firm, we have collated practical information on navigating the fiscal and legal aspects of investing in Paris. We hope you find this a useful insight into investing in the Paris real estate market. Larry Young Director Capital Markets International Investors BNP Paribas Real Estate 5

6 PARIS OVERVIEW Top Reasons to invest in Paris 1 THE LEADING OFFICE LETTING MARKET IN WESTERN EUROPE With a total take-up of over 2.4m m² in 2016, the office market in the Paris Region is one of the most dynamic in Europe. Paris has one of the world's largest office stock totalling 55m m². 2 A DIVERSE OFFICE OCCUPIER BASE The Paris office market has a highly diverse occupier base, as shown in % 9% 11% 11% 11% 7% 20% Bank - Finance - Insurance Industrial groups Public sector IT, telecom and start ups Communication - Creation Legal Retail - Logistics Other services 20% 6

7 3 PARIS IS THE LARGEST INVESTMENT MARKET IN CONTINENTAL EUROPE In 2016, Paris was the 5 th largest in the world. The investment market has grown steadily over the years with a 10-y average of 14 bn. 4 A STRONG RECOVERY IN THE OFFICE MARKET With a constant reduction of vacancy rates during the last 3 years from 7.4% in 2013 to 6.7% as of the end of 2016, the market has shown a strong recovery. 5 LIMITED OFFICE SUPPLY With low vacancy rates, limited supply and a recovering economy, prime rents are forecasted to increase in the mature and core business districts of the Paris region, and there have already been recent signs of growth such as the Paris Opera area. 6 GENUINE MARKET TRANSPARENCY France is in the top 5 markets in the globe for transparency. BNP Paribas Real Estate is a member of Immostat pooling commercial property research with all the main real estate advisors. 7 WORLD LEADING RETAIL MARKETS Paris is one of the world leading markets for high end retail, and continues to develop its impressive shopping centres and department stores. Examples of this are the new Louis Vuitton flagship on Place Vendôme that will open in 2017 and the recent re-opening of the Forum Des Halles shopping centre in the heart of Paris after an impressive redevelopment. 8 THE HIGH END RETAIL MARKET HAS SEEN IMPRESSIVE RENTAL GROWTH OVER THE LAST 5 YEARS Global brands battle for the best locations on the Champs-Elysees, Avenue Montaigne, Rue St Honoré and other famous addresses. New hot spots are also developing such as the rue des Francs-Bourgeois in the Marais. 9 LOGISTICS HOTSPOT The suburbs of Paris form part of the prime European logistics axe, conviniently located close to main airports and along main motorways and ring roads. The logistics market has been very strong in 2016 with the letting transactions of large e-commerce tenants and investments sort after by global investors THE PLACE TO BE FOR HOTELS France is still the world leading for the tourist industry, and has some of the finest hotels. There have been some significant renovations such as the recent re-opening of the Ritz on Place Vendôme and current renovation of the Crillon on Place de la Concorde.

8 PARIS OVERVIEW MAIN OFFICE MARKETS Where to invest in Greater Paris? The French capital has numerous established business districts that we will discover in the following pages. BOIS DE BOULOGNE BOIS DE VINCENNES PARIS CBD Extended CBD PARIS OUTSIDE CBD Paris Left Bank Paris Centre East LA DÉFENSE WESTERN CRESCENT Neuilly/Levallois Southern River Bend Péri-Défense Northern River Bend INNER SUBURBS Northern Inner Rim Eastern Inner Rim Southern Inner Rim OUTER SUBURBS 8

9 PARIS CBD* BOULOGNE CBD* With 569,000 m² taken-up in the broader Paris Central Business District in 2016, volumes remained high and well above the 10-year average (481,000 m²), despite a very slight downward trend (-2%) compared to deals for large units (over 5,000 m²) were signed in 2016, including 3 deals for over 10,000 m² : Banque de France in In Town building (18,800 m²), Siaci Saint Honoré with 14,300 m² in Season and Wework with 11,700 m² at 33 rue Lafayette. Vacancy rates in the CBD have been declining since 2013 and are the lowest within Paris Region. With only 2.5% of empty premises, vacancy in the CBD Opéra has even reached a record-low level. As such, the buoyancy of the Paris CBD office market and the current low level of supply are prompting investors to resume refurbishment schemes there, and new buildings are expected to be completed in 2017 and Rental levels have risen in the CBD Etoile and remained stable in the CBD Opéra. *Paris extended CBD: all of the 1 st, 2 nd, 9 th, 16 th and 17 th districts 2016 LETTING KEY FIGURES AVERAGE RENTS (new offices) 700/m 2 (Etoile) PRIME RENTS 686/m 2 (Opéra) 790/m 2 (Etoile) 800/m 2 (Opéra) TAKE-UP 569,000 m 2 take-up vs 481,000 m 2 take-up 10-year average 2016 INVESTMENT KEY FIGURES 4.2 bn Office investment vs 2.7 bn 10-year average 3.15% prime yield 13,500/m² average capital value 3.65% average yield 4.1 % vacancy rate 9

10 BOULOGNE PARIS OVERVIEW Centre East MAIN OFFICE MARKETS PARIS OUTSIDE CBD Paris Left Bank Thanks to the healthy trend of take-up for large units (12 deals), especially in the well-established office districts in the 13 th and 15 th arrondissements, volumes have significantly risen in Paris Left Bank and came in at 296,000 m² in 2016 (+35% vs. 2015). The largest transactions were the acquisition of 25,800 m² by Altice Media in Qu4drans and the leases of Le Monde (18,600 m²) in A2 and of Les Echos (17,750 m²) in 10 Grenelle. Most buildings in Paris Left Bank are taken-up before completion, and availability within a year has plummeted, down 41% vs. end Paris Centre East Even though the traditional business districts in Paris Centre East are mainly located near Gare de Lyon, northernmost arrondissements of Paris are progressively gaining in importance, with several large deals in 2016, such as BNP Paribas in Millénaire 1 and 4 (respectively 23,300 m² and 24,000 m²) in Paris 19. Supply within a year has been slightly decreasing for 3 years, and reached 340,000 m² on December 31, Paris Centre East is currently undersupplied, encouraging speculative building starts, and new buildings are currently under construction and are expected to be completed in the 2 coming years LETTING KEY FIGURES AVERAGE RENTS (new offices) 540/m 2 (Left Bank) 443/m 2 (Centre East) PRIME RENTS 670 /m 2 (Left Bank) 570/m 2 (Centre East) 362,000 m 2 availability within a year vs 463,000 m 2 10-year average TAKE-UP 552,000 m 2 take-up vs 356,000 m 2 take-up 10-year average 2016 INVESTMENT KEY FIGURES 2.5 bn Office investment vs 2.3 bn 10-year average 3.50% prime yield 8,100/m² average capital value 5.10% average yield 3.5 % vacancy rate 10

11 LA DÉFENSE La Défense Located on the western outskirts of Paris, La Défense is Europe s largest purpose-built business district. Whereas 2015 was disappointing for the take-up at La Défense, volumes reached outstanding figures in 2016, where 275,000 m² were taken-up (+93% vs. 2015). Transactions rose on all unit segments, especially in deals > 5,000 m², as 11 were signed, including 2 for over 40,000 m² : Saint-Gobain (49,000 m² in M2 building) and RTE (40,500 m² in Window ). Thanks to the quality of its supply and to particularly attractive prices, La Défense currently enjoys a favorable backdrop, and has proved very attractive for outsider companies, and accounted for 22% of deals > 5,000 m² in the Paris Region, representing a 10-year record. New supply AVERAGE RENTS (new offices) 505/m 2 (New) PRIME RENTS 2016 LETTING KEY FIGURES 407/m 2 (Second hand) 550/m 2 (New) 381,000 m 2 availability within a year vs 365,000 m 2 10-year average TAKE-UP 275,000 m 2 take-up vs 182,000 m 2 10-year average within a year was particularly low, as it represented 36,000 m², while major completions of new buildings are not expected before The vacancy rate decreased in 2016, and reached 9% at the end of the year. Incentives decreased over the year, to average 24% over INVESTMENT KEY FIGURES 2.3 bn Office investment vs 1.3 bn 10-year average 4.75% prime yield 7,500/m² average capital value 5.50% average yield 9.0% vacancy rate 11

12 PARIS OVERVIEW MAIN OFFICE MARKETS WESTERN CRESCENT Neuilly/Levallois Take-up came in to 107,000 m² in 2016, i.e. an increase of 26% over one year, especially thanks to the dynamic trend of small and medium sized units (+54% vs last year). Availability within a year slightly increased, and the vacancy rate reached 10.6% at the end of the year. Future supply should see several new or refurbished units being completed, such as Thais, Ecowest and Hub buildings in Levallois, and Think and Kosmo in Neuilly. Rents for new premises decreased in Neuilly and remained steady in Levallois in Southern River Bend After a record-breaking year in 2015, the office take-up in the Southern River Bend the area with cities such as Issy-les-Moulineaux and Boulogne fell by 44% in 2016 and came in at 166,000 m², just below the 10-year average (185,000 m²). This decline applied to both small and medium-sized units as well as to major deals. Meanwhile availability within a year amounted to 369,000 m², and shrank by 6% over the year. Several schemes are due for completion in 2017 and 2018, for instance Quai Ouest (15,600 m²), Aquarel (30,000 m²) and Switch (45,000 m²). Northern River Bend Péri-Défense Neuilly/Levallois PARIS Southern River Bend 12

13 Péri-Défense Péri-Défense the area surrounding La Défense and a traditional spill-over district saw 130,000 m² transacted over the year 2016, i.e. a drop of 29% compared to Whereas the market was buoyant in 2015 for large units, only 4 deals > 5,000 m² were signed in 2016, among which Franfinance (13,700 m²) in the Spring building in Nanterre and GSK (8,900 m²) in Mozaik in Rueil-Malmaison. However, supply within a year is very high, and the vacancy rate is the highest in Paris Region (15.9%). Northern River Bend The main office markets in the Northern River Bend are close to the Seine River or transport hubs, often on renovated former industrial sites. Take-up on the Northern River Bend came to 69,000 m², far from the 10-year average of 105,000 m². Three large deals were signed in 2016: Sage and Bayer (9,450 and 5,300 m² in the Atrium Défense building at La Garenne Colombes) and Credipar (9,000 m² in Pointe Métro 2 at Gennevilliers). The vacancy rate has significantly compressed but remains high (12.7%) while the availability within a year was well above the 10-year average LETTING KEY FIGURES 2016 INVESTMENT KEY FIGURES AVERAGE RENTS (new offices) 440/m 2 (Southern River Bend) 464/m 2 (Neuilly/Levallois) 343/m 2 (Péri-Défense) 287/m 2 (Northern River Bend) PRIME RENTS 460/m 2 (Southern River Bend) 540/m 2 (Neuilly/Levallois Bend) TAKE-UP 1,184,000 m 2 availability within a year vs 1,153,000 m 2 10-year average 4.4 bn Office investment vs 2.5 bn 10-year average 3.65% prime yield 5,600/m² average capital value 5.50% average yield 472,000 m 2 take-up vs 527,000 m 2 10-year average 12.2% vacancy rate 13

14 PARIS OVERVIEW Northern Inner Suburbs VINCENNES Southern Inner Suburbs MAIN OFFICE MARKETS INNER SUBURBS Eastern Inner Suburbs Northern Inner Suburbs Take-up on the Northern Inner Suburbs came to 75,000 m² in Very few building completions are expected in the two coming years, with only two buildings currently under construction Opalia, 11,000 m² in Saint- Ouen and Pulse, 27,000 m² in Saint-Denis and the majority of supply is made up of second hand buildings. Eastern Inner Suburbs Availability within a year came in at 79,000 m² at the end of 2016 in the Eastern Inner Suburbs. This marks a decline of about 30% since the end of New supply has been almost nonexistent since 2013, representing just 2% of the overall total. Thanks to the large deal of RATP in l Elyps in Fontenay-sous-Bois (32,500 m²), take-up reached 85,000 m² and almost doubled vs Southern Inner Suburbs About 94,000 m² was taken-up in the Southern Inner Suburbs in 2016, i.e. a 47% rise vs The supply within a year remains relatively high high with 292,00 m² including 75,000 m² of new supply. With the strong letting market and the limited future supply, we are expecting a decrease of the available spaces LETTING KEY FIGURES AVERAGE RENTS (new offices) 265/m 2 (North) 260/m 2 (East) 307/m 2 (South) 744,000 m 2 availability within a year vs 746,000 m 2 10-year average TAKE-UP 254,000 m 2 take-up vs 340,000 m 2 10-year average 2016 INVESTMENT KEY FIGURES 2.2 bn Office investment vs 1.7 bn 10-year average 4.35% prime yield 4,872/m² average capital value 5.51% average yield 7.8% vacancy rate 14

15 OUTER SUBURBS With 301,000 m² transacted over 2016, take-up in the Outer Suburbs decreased by nearly 10% vs. 2015, and fell short of its 10-year average of 390,000 m². There were just 6 transactions for units over 5,000 m², totaling 71,000 m², including Sofinco (36,200 m² in Massy), Aéroports de Paris (9,500 m² in Orly) or Groupe Bertrandt (7,400 m² in Vélizy- Villacoublay). Meanwhile, availability within a year has been particularly stable compared to last year, and still stood at approximately 1.1 million m². New supply only accounts for 14% of the total, which is not enough to attract major occupiers. Lowest-performing buildings need to be refurbished to rebalance supply and attract new occupiers. The office stock in the Outer Suburbs stands at 18.5 million m². The most represented business sectors in the Outer Suburbs in 2016 were ICT, bank-finance-insurance and industrial groups. The vacancy rate over the past 10 years ranged from 4.6% in 2006 to 6.6% in Rents for new offices in 2015 are lower than the 10-year average of 210/m²/year LETTING KEY FIGURES AVERAGE RENTS (new offices) 206/m 2 (new offices) 1,112,000 m 2 availability within a year vs 1,152,000 m 2 10-year average TAKE-UP 301,000 m 2 take-up vs 370,000 m 2 10-year average 2016 INVESTMENT KEY FIGURES 485 m office investment vs 750 m 10-year average 5.50% prime yield 2,400/m² average capital value 6.80% average yield 5.7% vacancy rate 15

16 PARIS OVERVIEW BNP PARIBAS REAL ESTATE TRACK RECORD 2016: SELECTION OF KEY DEALS Vendôme Saint Honoré - Paris 1 st district Surface: 26,800 m² Purchaser: NBIM Matignon - Paris 8 th district Surface: 7,300 m² Purchaser: French institution 16

17 So Ouest - Levallois Surface: 33,300 m² Purchaser: Samsung / La Française REP Novartis Campus - Rueil-Malmaison Surface: 42,200 m² Purchaser: KIS / Etoile Properties 17

18 PARIS OVERVIEW RETAIL MARKETS OPEN With 4.9 bn investment volumes in 2016, retail investment still benefits from a strong appetite from both French and international investors. Indeed, the retail asset class went beyond its safe-haven status and now represents a significant weight in investors strategic asset allocation. Bruno Ancelin Head of Retail Capital Markets BNP Paribas Real Estate 2016 MARKET TRENDS STRONG APPETITE FROM INVESTORS ON THE THREE RETAIL ASSET CLASSES : High-street: the most sought-after retail asset class. 51 % of the transacted volume in 2016 Shopping centre: significant transactions in 2016 despite a lack of Core products Overall, the market suffered from a lack of available products in Regarding the current transaction pipeline, we expect 2017 supply to be higher, especially in shopping centres. Out-of-town retail: institutional investors confirmed their interest in this asset class (+20% vs FY 2015) FOCUS ON PARIS PRIME RETAIL AXES Champs-Élysées Thanks to their international showcase status the Champs-Elysées avenue remains the most sought-after retail address in Paris with prime rent culminating to 22,000 / m²/ year. The avenue is in a microcosm of its own and is gearing up for another big bang with the scheduled arrival of Galeries Lafayette and Apple in

19 Saint-Honoré / Faubourg Saint-Honoré Faubourg Saint-Honoré is considered as the historical luxury heart of Paris. Rents are pressured by a high demand from international luxury brands to open new flagship stores, and due to the lack of availability in its best locations (close to the rue de la Paix), the luxury part of Faubourg Saint-Honoré is now expanding further with the recent openings of the Baccarat, Cifonelli and Rimowa flagship stores near the Bristol Palace Hotel. Since 2010, rue Saint Honoré has benefited from the lack of supply on Faubourg Saint- Honoré, and has attracted more than 20% of luxury brands openings in France. Rue Saint- Honoré is now the most prized address in Paris, as illustrated by the recent opening of Tory Burch, Fendi, Alexander McQueen, the renovation and future opening of respectively Chanel & Louis Vuitton flagships, and has led to major investment transactions such as Roberto Cavalli and the 1 bn Vendôme-Saint- Honoré deals. Rivoli / Marais In addition with the partial renovation of Les Halles, the current works at the Samaritaine makes rue de Rivoli attractive again, several high-end and luxury brands have already signed for flagship stores around the LVMH and Chanel projects. Le Marais is now one of the most active districts in terms of openings. It is flourishing by attracting luxury and high-end brands seeking competitive rents in this new trendy and touristic area, which results in a fierce competition on the main axes: Archives, Francs-Bourgeois and Rosiers. Demand for large pop-up flagship stores is rising as brands wish to test their concepts such as Chanel in the Hotel des Ambassadeurs de Hollande. BHV Marais, which now opens on Sundays, has given itself a makeover by installing Givenchy, Moncler, Fendi and Gucci on Rue des Archives. 19

20 PARIS OVERVIEW RETAIL MARKETS 2016: SELECTION OF KEY DEALS HIGH STREET Davidor / Armani - avenue Montaigne 8 th district of Paris Purchaser: Ponte Gadea SHOPPING CENTRE Domus - Rosny-sous-Bois Purchaser: Catalyst OUT-OF-TOWN RETAIL Retail Park - Claye Souilly Purchaser: Frey 20

21 CLIENT INTERVIEW France is of a particular interest in Hammerson s strategy as it represents 22% of the Group total proprietary investments. Hammerson France portfolio is composed of 9 shopping centres totaling 3.5 bn in value among which 70% are the Group proprietary investments. Ile-de-France is definitely a strategic location for the Group with 55 % of our investment portfolio concentrated in the region. Our strategy for the next 2 years is based on two major axis: Improving our current portfolio and creating value in investing more than 230M in different projects in Île-de-France : renovation Jean-Philippe Mouton, Chairman of Hammerson France and extension of the Cergy 3 Fontaines shopping centre, and a 7,000 m² extension of Italie 2 within the City of Paris Reinventer Paris tender process. Continue to look for new investments and innovative projects through acquisition opportunities. Île-de-France remains the economic heart of the country, and the breakthrough of the Grand Paris project will reinforce this attractiveness. In addition, the region is the most sought-after location in France for international investors thanks to robust economic fundamentals and a strong resilience of the retail market and rental values KEY FIGURES 2 nd European market in terms of retail consumption generating 490 bn turnover in 2016 With 4.9 bn investment volume, 2016 is the 3 rd best year for Retail Investment in France Investment volume is spread between Paris region (54%) and the rest of France (46%) Retail investment benefits from a good product mix : High-street: 51 % of the investment volume out-of-town retail : 28 % shopping centre: 20 % 200,000 m² of retail transacted in 2016 by BNP Paribas Real Estate 21

22 PARIS OVERVIEW LOGISTICS MARKETS Investors appetite for the logistics sector in the Eurozone is increasingly strong. France maintains its position as the 3 rd largest historic market in Europe with investments of more than 1.7 bn. The Ile-de-France region absorbed nearly 60% of volumes invested in Franck Poizat Head of Logistics Capital Markets BNP Paribas Real Estate 2016: MARKET TRENDS Investors from the services sector are moving towards the logistics sector and focusing on its more profitable assets. Current low interest rates offer opportunities to the more Core / Core + European funds, which still represent a large majority of the market with nearly 75% of the invested volumes. In 2016 there has been a rise in speculative development. More and more investors are attracted by: - speculative development, due to a rental market boosted - e-commerce - the reorganisation of the supply chain and of the main mass retail players. 2016: SELECTION OF KEY DEALS Gemini - Surface: 207,473 m² Purchaser: Tristan Capital Wolf - Surface: 357,500 m² Purchaser: York Capital Forlog - Surface: 539,000 m² Purchaser: RedTree Capital 22

23 FOCUS ON PARIS LOGISTICS HUBS A significant part of the prime European logistics market is located in the suburbs of Paris, especially close to the main airports and along the main transportation routes. With 1.7 million m² transacted over the year in 2016, Paris Region remained by far the largest logistics market in France. Main logistics hubs in Paris Region LOGISTICS IN ILE-DE-FRANCE Global park: 17 million m² 80% of the areas concentrated in 9 logistics hubs Top 3 includes Roissy and Sénart Centre Essonne 900,000 m 2 take up in airports and 8 motorways 2016 KEY FIGURES (FRANCE) Logistics investment: 1.7 bn vs 10 year-average: 1.3 bn Prime yield: 5.50% Average yield: 6.65% 23

24 PARIS OVERVIEW HOTEL MARKETS With more than 82.5 million tourists visiting France in 2016, France kept its position as the most popular tourist destination in the world, despite visitor figures recording a slight drop from 85 million in 2015 related to the events in Paris in November 2015 and Nice in July Bruno Juin Managing Director Hotels Capital Markets BNP Paribas Real Estate 2016 KEY FIGURES 3.5 bn invested in the sector in 2016, showing a slight drop compared to the volume recorded in 2015 but exceeding the 5-year average 3 rd most active / liquid / dynamic European market for hotel investment, after Germany and the UK Hotel investment in France remains concentrated on the Ile-de-France region, representing 56% of the total volume and 80% of individual asset transactions 56% of the total volume of investment International investors are principally focused on the city of Paris 24

25 THE FRENCH CAPITAL RECORDED FOUR TRANSACTIONS EXCEEDING 100 m: The Sofitel Paris Le Faubourg sold for an estimated 162 m to Joint Treasure International. Two Pullman properties were acquired by French investors, with the aqcuisition of the Pullman Tour Eiffel by Amundi Immobilier and the sale of the Pullman Paris Bercy to BNP Paribas Cardif. The end of the year saw the sale of 1,025-room Le Méridien Étoile, Paris' largest capacity hotel, to London-based investment firm Henderson Park, for an estimated amount of 365 m. The hotel supply in Paris is benefitting from an overall improvement of product quality, with some of the major landmark luxury hotels having recently undergone extensive renovations and expansion programmes. The most notable re-opening in 2016 concerned the 5-star Palace Ritz hotel, which reopened its doors after a four-year refurbishment. New and innovative concepts in the budget and mid-scale segments are also making their way onto the parisian hotel scene, with brands such as MotelOne, CitizenM, 25Hours and Zoku. With an ever-solid market base, the outlook for the French, and in particular the Parisian, hotel investment market remains soundly positive. The Palace Ritz Hotel (Place Vendôme) 25

26 INVESTOR TOOLKIT NEED TO KNOW KEY LEGAL & TECHNICAL TERMS The law firm Baker McKenzie gives you the legal keys to understand the French property market REAL ESTATE INTEREST The term "real estate" includes: the land, soil and sub-soil any buildings or structures built on it. Real estate property is held by: ownership or lease agreement. REGISTRATION OF REAL ESTATE INTEREST Documents transferring real estate properties located in France must be published at the Land Registry (fichier immobilier) in order to be binding upon third parties. To this end, the deed of sale of a real estate property must be drawn up by a Notary. Leases whose duration exceed twelve (12) years must also be published in the Land Registry. NATIONALITY RESTRICTIONS ON REAL ESTATE OWNERSHIP There are generally no restrictions on foreign ownership of French real estate, which is subject to obtain very few authorisations and where administrative declarations shall be made, as the case may be. However, exchange control applies to real estate activities and may trigger filing obligations for statistical purposes. MAIN PERMITS OR LICENSES REQUIRED FOR BUILDING OR OCCUPYING REAL ESTATE As a matter of general principle, a demolition permit and/or a building permit will have to be obtained if a building is to be built or if a building is to be demolished and rebuilt or renovated. As regards to the use of premises, especially in the Paris area, French Construction and Dwelling Code (Code de la Construction et de l'habitation) provides that premises with residential use cannot have any other use unless specific authorisation is obtained from relevant public authorities. Specific authorisation (CDAC) is also needed to open retail premises with a sales area in excess of 1,000 m 2. To this extent, The Pinel law dated June 18 th 2014 and a decree dated February 12 th 2015 create a common process for the application of a building permit and an autorisation to open retail premises at the same time. 26

27 BINDING AGREEMENTS FOR SALE Parties are legally bound as soon as they execute a reciprocal sale and purchase agreement under conditions precedent and/ or a final sale and purchase agreement. However, under French law, a sale is binding between vendor and purchaser as soon as there is an agreement on the subject matter of the transaction and on the price. As a consequence, an unqualified offer letter made by a purchaser which is duly accepted by the vendor could result in a binding sale and purchase agreement. Finally, and pursuant to a decree (ordonnance) enacted on February 10 th 2016 applicable to agreements entered into as of the 1 st of October 2016, obligation to negotiate and to execute agreements in good faith has been reinforced. Different sections of the French civil code, which impact agreements for sale, have been also modified. USUAL FORMS OF LEASES Commercial lease: applies to premises in which a business is carried out. The French commercial code, governs the duration, renewal and termination of commercial leases, rent review, use of the premises, sub-letting and assignment of the Lease, service charges and taxes that may be e-invoiced to tenant. The duration of commercial leases cannot be less than nine years. Other provisions, such as maintenance and repairs, are governed by Legal provisions of the French civil code. French regulations on commercial leases have been amended by the so called Pinel law June 18 th 2014 and related decree November 3 rd 2014, which are protective for tenants and prevent triple net leases. This decree notably lists service charges and taxes that cannot be borne by tenants. Pursuant to a decree (ordonnance) enacted on the 10 th of February 2016 applicable to agreements entered into as as of the 1 st October 2016 (please see above), different sections of the French civil code, which may impact lease agreements, have been modified. Ground Lease (Bail à construction): is a lease under which a tenant undertakes to construct buildings on landlord's plots of land and to maintain these buildings in a good state of repair. The term of the ground lease will be between 18 years and 99 years. Ground leases grant an immovable property right to tenant. During ground lease term, the tenant will remain the owner of the constructions. Upon termination, landlord will become the owner of the constructions and improvements. Residential lease: applies to property, which is in France, regulated by specific rules. As a matter of general principle, a residential lease is entered into for six years if the landlord is a company or for three years if the landlord is an individual. Derogatory lease: is a short term lease subject to the provisions of the French civil code. Such lease can be granted for a maximum total period of 3 years upon the initial occupation of the rented premises by tenant. 27

28 INVESTOR TOOLKIT NEED TO KNOW KEY LEGAL & TECHNICAL TERMS TERMINATION OF COMMERCIAL LEASE SECURITY OF TENURE As a matter of general principle, the landlord cannot terminate a commercial lease during the contractual period. However, the tenant benefits from a triennal right of termination, the tenant may contract out of such triennial right of termination in certain circumstances depending on the nature of the rented premises and on the lease duration. This right to depart from tenant s triennial right of termination has been limited by the so-called Pinel law. Notice to quit must be delivered by a process-server (Huissier de justice) or, in certain cases, by registered letter six months in advance. Security of tenure is an essential aspect of French regulations on commercial leases and is the right of tenant to obtain renewal of the commercial lease upon its expiry. Landlord cannot refuse to grant this renewal without paying compensation for eviction to the tenant. FINANCING OF REAL ESTATE INVESTMENTS Real estate investments are generally financed with equity contributions and with a bank financing. Real estate bank financing are usually structured as mortgage backed loans (secured by a mortgage over the financed property and as the case may be, by other security interests over the borrower's assets, e.g. rent receivables, insurance receivables, and over the shares of the borrower), enabling the lender to benefit from a priority ranking over the borrower's assets and cash-flows. ENERGY PERFORMANCE REQUIREMENTS FOR BUILDINGS Different French Laws enacted over the past few years provide for minimum energy efficiency requirements for existing and new buildings. A specific energy efficiency report (Diagnostic de performance énergétique) has been created which states the quantity of energy used according to the type of use of the building. This report shall be communicated to purchasers and tenants. Since Pinel law, landlords must inform tenants every three years of work completed in the rented premises during the last triennial period and on works provided over the next triennial period. 28

29 FRENCH GREEN LEASES An environmental annex detailing the energy consumption in the building, the technical equipment located in the building, landlords and tenants' respective obligations must be attached to office or retail leases. This applies to new leases entered into as of the 1 st of January 2012 and to ongoing leases or renewed leases as of July 14 th 2013 for surface areas in excess of 2,000 m 2. The content of this annex is detailed in decrees enacted on December 30 th 2011 and April 12 th ENVIRONMENTAL LAWS AFFECTING THE USE AND OCCUPATION OF REAL ESTATE French Environmental Code (Code de l Environnement) set specific standards and regulations affecting the use and occupation of real estate. For instance, specific authorizations and/or administrative approvals and/or declarations are required by environmental legislation for starting or ceasing operation of a classified facility (Installation classée) such as storage and manufacturing activities. 29

30 INVESTOR TOOLKIT NEED TO KNOW ACQUISITION: HOW FRANCE IS POSITIONED RELATIVE TO ITS EUROPEAN NEIGHBOURS FRANCE GERMANY How can real estate be held? What rights over real property are required to be registered? What property documentation do you need to register? Ownership or Lease agreement. All documents transferring or encumbering real estate properties must be published at the Land Registry (fichier immobilier) in order to be binding upon third parties. Full ownership; Condominium or partial ownership; Hereditary building right (real estate - like right in rem entitling its holder to build on land owned by a third party). Rights in rem over real estate require registration, including: Ownership; Easements, pre-emptive purchase rights, usufruct rights, priority notices and hereditary building rights; Land charges, mortgages and easements. Are there nationality restrictions on land ownership? Generally no restrictions except under certain circumstances where exchange control provisions trigger filing obligations. Generally, no restrictions apply to foreign ownership of German real estate. Who usually produces the documentation in real estate transactions? In case of direct sale of real estate properties, French notaries, and in case of indirect sale, any Legal counsel. Typically, seller's lawyer prepares the first draft of the sale and purchase agreement which is then marked-up by buyer's lawyer and then subsequently negotiated until a final agreement is reached. If the parties are not represented by lawyers, the German notary recoding the sale and purchase agreement prepares the draft documentation. What are the main documents involved in a real estate acquisition? Offer letter; Due diligence report; Promise or sale and purchase agreement under conditions precedent; Final sale and purchase agreement; Finance documents. Sales memorandum/prospectus; Due diligence report; Sale and purchase agreement; Finance Documents; Asset/property/facility management agreements. 30

31 ENGLAND & WALES SPAIN ITALY Ownership or lease agreement. Freehold or other rights in rem, either securing an obligation (mortgage) or granting a limited right over the property (usufruct, other rights of use, or right to build); Leasehold (which can be registered with the Property Registry). Ownership; Usufruct; Right in rem entitling its holder to build on land owned by a third party (" diritto di superficie"); Condominium or partial ownership. All documents transferring or encumbering real estate properties must be registered at the Land Registry in order to be binding upon third parties. Please note that leases for seven years or less are not registrable. Some specific real estate rights need to be registered in order to be effective, such as mortgages or rights to build. However in general terms, real estate rights are not required to be registered to be effective, but in practice any transfer of real estate assets is registered in order to benefit from the publicity provided by the Property Registry. Italian Civil Code provides that all documents transferring and/or encumbering real estate properties (including, inter alia,(i) deeds establishing rights in rem over real estate - including, but not limited to, easement rights, surface rights, usufruct, rights of use, pre-emptive purchase rights -, (ii) sale and purchase agreements (preliminary and definitive), (iii) land charges and mortgages, (iv) lease agreements (having a duration exceeding 9 years) shall be registered with the public register in order to be enforceable ("opponibile") vis-à-vis third parties. No. No. Spanish law has adapted its foreign rules to a system of general liberalisation, without distinguishing between EU residents and non- EU residents. Depending on the specific investment carried out, a number of administrative requirements must be met, generally after an investment (or Liquidation of an investment) is made, with the Spanish Foreign Investment Registry. Generally, no restrictions apply to foreign ownership of Italian real estate. The Seller's legal counsel in relation to asset sales and also, usually, in relation to indirect sales (share sales). Any party can prepare the relevant documentation. Generally, the purchaser's lawyers prepare the initial draft of the purchase agreement. Such agreement, when final, is inserted in a public deed which is authorised by a Notary Public. Apart from very specific exceptions, only Public Deeds authorised by a Notary Public have access to the Property Registry. Usually, seller's lawyer prepares the first draft of the sale and purchase agreement to be marked-up by buyer's lawyer and subsequently negotiated until a final agreement is reached. Such agreement needs to be entered into before a notary public and registered with the competent public register. Offer letter; Due diligence report; Sale contract; Transfer. Due Diligence report. Depending on the specific asset, a technical or environmental report is also usually requested by the purchaser; Reservation or Promise of sale and purchase under conditions and penalties in case of relinquishment; Purchase Agreement. The Purchase Agreement is sometimes replaced by an Option to Purchase, granting the beneficiary the right to proceed with the purchase of the property within an agreed period of time; Transfer Deed to be executed before a Notary Public. Offer letter; Due diligence report; Promise or preliminary sale and purchase agreement under conditions precedent; Final sale and purchase agreement to be executed before a notary public. 31

32 INVESTOR TOOLKIT NEED TO KNOW LETTING: HOW FRANCE IS POSITIONED RELATIVE TO ITS EUROPEAN NEIGHBOURS What are the usual forms of real estate leases? Are commercial lease provisions freely negotiable? FRANCE Ground leases (whereby the tenant undertakes to construct buildings on landlord's plot of land); Commercial leases; Residential leases ; Derogatory leases. Certain provisions mainly relating to the duration, to service charges and to the tenant s right of renewal are mandatory. Other provisions not covered by the French commercial code are freely negotiable. GERMANY Commercial leases; Residential leases; Tenancy agreements (Pachtverträge); Ground leases (Errbaurechts vertrag). Generally, commercial lease provisions can be widely negotiated between the parties. However, if lease provisions qualify as general terms and conditions, they are subject to a particular scrutiny and have to comply with a specific set of statutory provisions and case law to be valid. Is there a maximum term for commercial leases? How are commercial rents reviewed? Commercial leases cannot be less than 9 years, but may be entered into for a longer term. Tenants benefits from a triennial right of termination but it may contract out such right, under conditions. Commercial leases longer than 12 years must be published with the Land Registry. Commercial rents may be indexed on an annual basis. However, an Index is only valid if it relates directly to the object of the contract or the activity of one of the parties (generally an index published by the French State Statistical Institute is chosen by the parties). In addition, legal rent review can occur every three years if specific criteria are met. Commercial leases may have an indefinite term subject to termination within the statutory or contractually agreed notice periods. Generally, fixed terms must not exceed a term of 30 years. A lease agreement providing for a fixed term of more than 30 years will be deemed a lease having an indefinite term after 30 years, and then be subject to termination within the statutory notice periods. Rents under commercial leases binding the landlord having a term of at least ten years may be linked to the consumer price index published by the German Federal Statistic Office. Commercial leases may also provide for a stepped rent or a lease review clause instead to adjust the rent to fair market rent at the time of renewal or extension. What are the basic obligations of landlords? Repairs and maintaining the structure of rented premises (generally major repairs); Insure the rented premises. Hand over the leased space in the agreed condition; Repair and maintenance the roof and shell of the property, as well as common areas; Insure the rented property. What are the basic obligations of tenants? Pay rent and service charges; Keep the rented premises in good maintenance and repair; Insure its belonging, merchandise and goods within the rented premises. Pay rent and service charges; Keep the rented premises in good maintenance and repair; Insure its belongings and goods within the rented premises as well as other risks connected with the activities carried out in the premises. 32

33 ENGLAND & WALES SPAIN ITALY Ground leases (where the tenant undertakes to construct buildings on landlord's plot of land); Commercial leases; Residential leases. Yes. Residential Lease; Non-Residential Lease; A Non-Residential Lease is a lease the main purpose of which is different from that of the Residential Lease (i.e. commercial, industrial, services, etc.). The Non-Residential Leases are, in principle, governed by the will of the parties, and failing that, provisions of the Urban Leases Act are Mandatory (Ley de Arrendamientos Urbanos or L.A.U.) of Additionally, the Civil Code is supplementary. Commercial leases; Residential leases. Certain legal provisions mainly relating to the duration, rent and tenant's right of withdrawal are mandatory. While other provisions are freely negotiable. However, parties may depart from the above mandatory provisions in those commercial leases where the annual rent is greater than 250,000 and the leased premises are not qualified as historic premises under a provision of the relevant municipality or region. No. Leases longer than seven years must be registered at the Land Registry. The term is freely agreed between the parties. In case it is not agreed or determined, the provisions of the Civil Code will apply. As a general rule, if the term of the lease is not specifically indicated, it will be the same as the rent payment term. Pursuant to Italian Law, commercial lease agreements shall have a minimum duration equal to 6 years (9 years in case of hotel use); in any case, commercial leases can not... exceed a term of 30 years. A lease agreement providing for a fixed term of more than 30 years will be deemed a lease having a 30 year term. Generally an 'open market' basis but the parties can agree indexation or any other basis. Rents are reviewed through the system agreed by the parties. The most usual systems to carry out such review are: Review to adapt the rent to current market value. This could be through appraisal by a real estate expert; Review to adapt the rent to the Consumer Price Index (IPC); By establishing a scale of rent increases through the rent term. Commercial rents may be indexed on an annual basis linked to the consumer price index published by the Italian Statistic Office (ISTAT). Commercial leases can not provide for a stepped rent or a lease review clause to adjust the rent to fair market rent. Parties may agree that rent is indexed on another basis in those commercial leases where the annual rent is greater than 250,000 and the leased premises are not qualified as historic premises under a provision of the relevant municipality or region. This will depend on the terms agreed between the parties. Usually in a multi-occupied building the landlord retains responsibility for repair of the structure, common parts and insurance and is reimbursed via a service charge. However, in single let buildings, particularly for a nonoffice use, the tenant will assume liability for the repair of the entire building and also for insurance. The basic obligation of the landlord is to guarantee that the tenant enjoys peaceful possession of the property through the lease term and can use it for the purposes established in the lease agreement. This means that the Landlord shall undertake, at his/ her own cost, all necessary works to keep the property in the agreed conditions to be enjoyed by the tenant. In some cases, such works may entitle the landlord to increase the rent; Under certain circumstances, the landlord might be obliged to indemnify the tenant in case of refusal of extension of the lease term once the initially agreed expiries. Hand over the leased space in the agreed condition; Repair and maintain the structure of the rented premises (generally major repairs); Insure the property. Warrant the peaceful enjoinment of the rented premises during the lease period. Pay rent and service charges; Keep the rented premises in good maintenance and repair; Insure its belongings, merchandise and goods within the rented premises. (but please see comments above in relation to single let buildings). To pay rent and service charges; To keep the leased premises in good maintenance and repair the damages to the property caused by the tenant or by normal use. Pay rent and service charges; Keep the rented premises in good maintenance and repair the damages; Insure the leased property its belongings and goods within the rented premises as well as other risks connected with the activities carried out in the premises. 33

34 INVESTOR TOOLKIT TAX CLINIC This overview highlights the potential tax consequences of direct or indirect investments in French real estate by non-resident investors. In this respect, Baker McKenzie has outlined below the principle tax issues raised by the acquisition, rental and sale of French real estate by foreign investors, both individual and corporate. 1 ACQUISITION OF THE FRENCH REAL ESTATE: VAT AND TRANSFER TAX In principle, transactions relating to less than 5-year old buildings are subject to VAT and transfer tax is applicable to the other transactions. A major real estate VAT reform entered into force on March 10 th, VAT on real estate properties is now ruled by the standard VAT principles but some transactions remain VAT-exempt and subject to VAT election. In general, the liable person for the VAT is the seller. This new regime lays on the main distinction between transactions on real estate assets performed by persons or entities liable to VAT and transactions on real estate assets performed by person or entities which are not liable to VAT. Transactions performed by persons or entities which are not liable to VAT are, as a matter of principle, VAT exempt. These transactions are thus subject to transfer tax at the standard rate of % or % depending on the location of the building. (Please note that all departments of the Ile-de-France areas have voted the increase of the standard rate up to % including Paris as from 1 st January 2016). Concerning transactions performed by persons or entities which are liable to VAT, the following distinctions must be made: 34

35 In case of the acquisition of land to be built on ("terrain à bâtir"): VAT at 20% to be paid on the purchase price if VAT has been deducted by the Seller upon its acquisition or on the margin. Transfer tax at % or % depending on the location of the building (standard rate increased in Paris as from 1 st January 2016) if VAT on the margin or publicity tax at % if VAT on full price is payable. However, no transfer tax is payable, provided that the purchaser takes and respects the commitment to complete the building works within four years as from the acquisition or publicity tax at % if the purchaser takes the commitment to resell it within five years. In case of acquisition of a land which can not be qualified as land to be built: VAT-exempt but possibility of electing for the application of the VAT at 20% (by the seller). Transfer tax at % or % depending on the location of the building. However, no transfer tax is payable, provided that the purchaser takes and respects the commitment to complete the building works within four years as from the acquisition, or publicity tax at % if the purchaser takes the commitment to resell it within five years or no transfer tax (only a fixed duty of EUR 125) provided that the purchaser takes and respects the commitment to complete the building works within four years as from the acquisition. In case of VEFA: VAT at 20% on the purchase price. Publicity tax at % In case of acquisition of a new building (i.e. completed since less than 5 years): VAT at 20% on the purchase price. Publicity tax at % In case of acquisition of a building more than five years old: VAT-exempt but possibility of electing for the application of the VAT at 20% to be paid on the purchase price if VAT has been deducted by the Seller upon its acquisition or on the margin. Transfer tax at % or % depending on the location of the building, or publicity tax at % provided that the purchaser takes and respects the commitment to resell it within five years. Additional tax to transfer tax or property tax at the rate of 0.6% if the building constitutes offices, commercial or storage premises located in the Ile-de-France area (global rates increased to % or %). VAT neutral regime: In certain circumstances (notably purchaser and seller are long term real estate investors, are subject to VAT and have duly elected to submit rental income relating to commercial/office buildings to VAT), the sale of a property can be disregarded from a VAT standpoint and VAT neutral regime may apply. 35

36 INVESTOR TOOLKIT 2 TAX ON RENTAL INCOME Non-resident individuals: Non-resident individuals may invest in France either by directly purchasing the real estate asset, or by purchasing the shares of a French company which holds the real estate asset. Individuals receiving rental income from French real estate are subject to French income tax at the progressive rate, up to 45%. It should be noted that non-resident individuals owning real estate assets, directly or through a company, in France, which are not rented out may be liable to income tax on a basis corresponding to three times the rental value of the building, save that the individual is a resident of a country with which France has concluded a tax treaty (section 164 C of the FTC). Non-resident individuals may also be liable to social contributions (CSG-CRDS) at the rate of 15.5% on rental income and capital gains. TAX CLINIC CIT applicable in France. In 2017 the new rate of 28% would be only applicable to companies that qualified as French "petites et moyennes entreprises" (PME) and would be applicable only up to 75,000 of taxable profit. 3 VAT ON RENTS As a general rule, the lease of unfurnished buildings (without equipment) allocated to professional activities (e.g. offices) is exempted from VAT. The lease of residential buildings is never subject to VAT. However, pursuant to article 260, 2 of the French Tax Code ("FTC"), where properties are leased for professional purposes, the landlord can voluntary elect for VAT on its rental income, notably in order to be in position to deduct VAT on expenses attached to the building rented (or to be rented) (e.g. VAT upon acquisition, VAT upon works ). When the real estate asset is held through a corporation, the individual shareholder will be subject to a withholding tax (standard rate of 30% which may be reduced by most of double tax treaties) on the dividends received from the company. Non-resident companies: Rental incomes deriving from French properties and received by a foreign corporate shareholder are subject to Corporate Income Tax, in France, at the rate of 34.43% (33 1/3% + surcharge). Please note that the finance bill for FY 2017 has introduced a progressive reform regarding the decrease of the rate of 4 EXIT TAXES Subject to double tax treaties provisions, gains realized by a non-resident (individual or company) upon the sale of a French real estate asset are subject to capital gain tax in France. The Real Estate asset is sold by a foreign individual: Capital gains realized on an occasional basis, is subject to a French withholding tax at the standard rate of 19% irrespective of the place of residency of the seller: EU or not EU 36

37 individual resident (except if the individual is a resident of a non-cooperative country). In case of usual basis sales, the rate remains at 33%. The Real Estate asset is sold by a EU (+Iceland, Norway and Lichtenstein) resident company: Capital gains generated as from March 1 st, 2010 are calculated in the same way as capital gains generated by French corporate taxpayers, i.e. based on the difference between the disposal proceeds and the deemed net book value of the building at the time of the disposal. The capital gains is taxed at the rate of 33 1/3% (specific rate if location in a noncooperative country). 5 REAL ESTATE TAXES There are two main annual local property taxes in France. The first one is a residence tax (taxe d habitation) which must be paid by the occupiers, as at January 1 st of the year, of the building. The second one is the land tax (taxe foncière), which must be paid by the owner of the building. This tax is due for the year by the owner of the property as at January 1 st of the said year even if the property is sold during the year. Both taxes are paid by residents and nonresidents. KEY LEGAL AND TECHNICAL TERMS AUTHORS Hervé Jégou Local Partner - Baker McKenzie SCP Marc Mariani Partner - Baker McKenzie SCP Pierre-Marie Ouchet Local Partner - Baker McKenzie SCP TAX CLINIC S AUTHOR 6 OTHER TAXES There are few other taxes to be taken into account when investing in French real estate, in particular the wealth tax and the 3% annual tax. Virginie Louvigné Local Partner - Baker McKenzie SCP 37

38 FUTURE PARIS THE GREATER PARIS PROJECT AND "INVENTING THE GREATER PARIS METROPOLIS" "INVENTONS LA METROPOLE DU GRAND PARIS" Launched at the beginning of the 2010s, the Greater Paris project aims to create a metropolis and to develop a sustainable urban, social and economic model that is more attractive, competitive and connected. To start an investment momentum on its territory, the metropolis decided to launch a call for projects Inventing the Greater Paris Metropolis. This initiative provides all real estate professionals (architects, developers and builders ) with many opportunities on numerous strategic sites that are open for consultation. For the 59 sites concerned, 420 candidacies were submitted (by January 2017). The winners will be revealed in the summer of The projects will be selected on their innovative character in terms of economic development or social integration. 38

39 THE GRAND PARIS EXPRESS AND RELATED URBAN PROJECTS The Greater Paris metropolis has outlined a major transport project to compensate for the current centralised transport system in which all subway lines converge towards the centre of Paris. This new network will quickly serve all the territory s new hubs. This project will make the Greater Paris an accessible territory and offer new urban development opportunities. With the new lines coming into service between 2018 and 2030, developers have already anticipated real estate projects linked to the future transport infrastructure, in particular in the neighbourhoods with Grand Paris Express stations. While some projects are based on the opportunities offered by this new subway, others will just be accelerated by it. Légende Projects linked to the GPE Projets en lien avec le GPE Projects accelerated by the GPE Projets initiés par le GPE Projets accélérés par le GPE 39

40 FUTURE PARIS THE GREATER PARIS PROJECT AND "INVENTING THE GREATER PARIS METROPOLIS" CLUSTERS OF THE GREATER PARIS The Greater Paris metropolis is organised around seven clusters specialised in various economic sectors. Each cluster groups on its territory universities, research laboratories and companies, thus encouraging continuous innovation in the health, sustainability city, aerospace and advanced technology sectors La Défense, Nanterre la Folie Financial cluster Companies in the banking, insurance and economic management sectors 160,000 jobs, 1,500 head offices among which 15 of the 50 largest global companies 3.2 million m ² of office space Paris-Saclay Applied research and technology industries Advanced education institutes: HEC, Polytechnique, CEA, Centrale-Supélec Companies in advanced industries: EDF research centre, Areva, NTIC (Alcatel Lucent) Saint-Denis Pleyel Creative cluster 3D imaging, Cinema (Europacorp studios, Euromédia) and Arts and Entertainment sectors. Education: Condorcet campus La Nanterre la Folie St-Denis CDG, Villepinte International airport and events CDG Airport: 65 million passengers annually Villepinte Parc des Expos: 250,000 m 2 of exhibition space Le Bourget Business airport and aerospace industries: EADS and Airbus Descartes, Noisy Sustainability city cluster Higher education (Ecole des Ponts et Chaussées, Ecole d Urbanisme de Paris) Research labs: (IFSTTAR) and companies Large Health Campus Villejuif: Canceropole (Oncology centre) with IGR research labs and engineering universities (8,000 researchers) Evry: Genopole with research labs in the biotechnology sector 40

41 "INVENTONS LA METROPOLE DU GRAND PARIS - SAMPLE OF SITES" Saint-Denis Pleyel Saint-Denis Porte de Saint-Ouen Paris 17 th district The proposed site stretches for almost 4 hectares. It is located along the Northern Europe rail lines, which at other points borders the Saint-Denis Pleyel Greater Paris Express station. This site, positioned at one of the entrances to the densely populated metropolitan area, benefits from exceptional visibility from the rail lines and the A 86 motorway overlooking it. In addition, it is at the heart of the area in the running for hosting the 2024 Olympic Games. Beginning in 2023, it will become a major hub on the metropolitan level, due to the Saint-Denis Pleyel train station. This station is a unique junction point for connections between the GPE lines 14, 15, 16 and 17, the Parisian Metro line 13 and lines D and H of the Transilien network. The Porte de Saint-Ouen site is part of the Innovation Arc, an urban and social laboratory for innovation. The approach to handling a gateway between Paris and its suburbs is a major issue for the Metropolitan Area. This Parisian property of over 4,300m² (firm tranche and optional tranche) is a key site in Paris green belt. The development projects underway in the surrounding gates and muncipalities represent promises of renewed attractiveness for this interface territory, which will have the mission of offering solutions for new urban uses. La Défense transport hub 41

42 OUR INVESTMENT TEAMS BNP PARIBAS REAL ESTATE TRANSACTION OUR INVESTMENT TEAMS Our investment transaction teams deal with investors of all types (investment managers, funds, insurance companies, private clients, developers ) and all nationalities. We accompany our clients for their acquisition and disposal strategies, through on and off market operations, for single assets, portfolios, or sale and lease backs. In France during 2016, we have affirmed our leading position in the market with 19 bn of investment volume transacted in commercial real estate: offices, retail, industrial/logistics, hotels. Our comprehensive market knowledge of both leasing and investment markets in France, our dynamic analysis of all actors of the real estate market, coupled with the strength of our research teams, allow us to provide you the best guidance and adapted advisory services. We provide our investor clients with day-to-day assistance for the implementation of their acquisition and management strategy, at an international level. With France-based specialists of international investment, and local offices to cover Asian, Gulf and American investors, our international client benefit from our expertise in the European real estate markets and our unique business model. 42

43 Contacts HEAD OF INTERNATIONAL INVESTMENT GROUP (IIG) Etienne Prongué +33 (0) CAPITAL MARKETS INTERNATIONAL INVESTORS - FRANCE Larry Young +33 (0) larry.young@bnpparibas.com André Spehr +33 (0) andre.spehr@bnpparibas.com Rory Sheard +33 (0) rory.sheard@bnpparibas.com Guillaume Poma +33 (0) guillaume.poma@bnpparibas.com RESEARCH CEO ADVISORY FRANCE Laurent Boucher +33 (0) laurent.boucher@bnpparibas.com HEAD OF CAPITAL MARKETS Olivier Ambrosiali +33 (0) olivier.ambrosiali@bnpparibas.com LOGISTICS CAPITAL MARKETS Franck Poizat +33 (0) franck.poizat@bnpparibas.com RETAIL CAPITAL MARKETS Bruno Ancelin +33 (0) bruno.ancelin@bnpparibas.com HOTELS CAPITAL MARKETS Bruno Juin +33 (0) bruno.juin@bnpparibas.com Richard Malle +33 (0) richard.malle@bnpparibas.com 43

44 IN A CHANGING WORLD, TOMORROW S REAL ESTATE IS BUILT TODAY. BNP Paribas Real Estate: 167 Quai de la Bataille de Stalingrad, Issy-les-Moulineaux Cedex. Tel. + 33(0) SAS with a capital of RCS Nanterre - SIRET Code NAF 7010 Z 6 REAL ESTATE BUSINESS LINES FOR YOUR PROJECTS realestate.bnpparibas.com Real Estate for a changing world