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Xavier Lepine Interview - “The success of Grand Paris also requires innovation in real estate.”

22 December 2017

Xavier Lépine, Chairman of La Française, comments on the challenges of the Grand Paris project, a project of a scale not seen in Paris since 1860. He also talks how the group will meet those challenges.

What are the challenges of Grand Paris and in what ways is this project significant?

Since 1860, Paris has not experienced any major changes on such a scale. The aim is to double the existing railway network via a 200 km extension and the construction or expansion of 68 stations. Alongside the cultural and architectural dimension, it is an important structuring project. The ambition is to both facilitate and streamline the daily movements of 2 million people but also to create hubs of activity at the regional level. Innovation and research in Saclay, health in VilleJuif, aeronautics in Bourget, TV and cinema in Saint-Denis Pleyel, etc. The challenge lies in the creation of value. The works, with a budget of between €25 - €30 billion, should generate investments in the construction of housing and offices amounting to €75 billion. Moreover, these developments will clearly be a vector of wealth when we consider that the GDP per capita is 15% higher in the major developed cities. Finally, with Brexit and the 2024 Olympic Games, the project benefits from a buoyant context that could allow Paris to become the European capital.

How will La Française participate in the Grand Paris project?

Our group is not just active in asset management. 

With real estate assets under management of €15 billion in Europe and more than 500 assets in the Paris region (Ile-de-France), we also possess a significant amount of land assets. 

It was therefore natural for us to participate in this monumental project, which has no equivalent in Europe. In concrete terms, following the consultation launched by Métropole Grand Paris regarding 57 sites aiming to build a resilient, innovative and sustainable metropolis, La Française has won three sites within the business group. 

These are the “Franchissement Pleyel” in Saint-Denis, the Ardoines in Vitry-sur-Seine and the Rungis Bridge in Thiais and Orly. In addition to these projects, we also want to position ourselves on the eco-districts that will be created to support these major projects. It is indeed likely that land is ultimately the key to this project. 

To do this, we will created an unlisted real estate company in which we will make a €50 million commitment with the objective of generating €1.5 billion in inflows within two years.

How does your approach stand out?

The jury of the requests for proposals was particularly sensitive to our innovative proposals for offices and housing. In a deflationary context, there is the problem of the solvency of demand. Regarding offices, we propose introducing flexibility in leases and renting premises that can be converted and transformed for a fixed period. The owners will have to organise themselves to meet the demand. This notion of evolution towards turnkey services is a challenge for Grand Paris. And regarding residential property, two solutions are proposed. The first is a scheme of property "for life". Inspired by a model in place in the UK, it is an alternative to property "for eternity" and simple rentals. The idea is to acquire a property from an institutional investor for use during a very long predefined period. The second proposal is the "partially perpetual loan" which echoes existing systems in Switzerland and the Netherlands. The borrower repays a portion of the capital over a period of time after which he only pays the cost of interest.

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