Filósofos póstumos

3.2.2.1 Location

Sarcelles lies approximately 6 km north of Paris in the southern part of the département Val d’Oise. Between 1954 and 1974, several large housing estates were planned and built here,

as in all of France. These large housing estates were designed to lessen the housing shor- tage caused by the destruction during the war and by population growth, and create housing for immigrants from Algeria. Many of these large housing estates were built by subsidiaries of the CDC and are still in their possession today. Some 38,000 residents live in these large housing estates, making up more than 60 per cent of the inhabitants of Sarcelles. These large housing estates are comprised of approximately 60 per cent social housing and offer lit- tle space for commercial and service use. Today, many of the large housing estates are plagued by social problems and a lack of economic activity.

Figure 16 – "Lochères" (DIV) housing estate with indication of location of "Foncière Camus" project The Foncière Camus project is located on the western edge of the Lochères housing estate near a shopping centre. This section of the estate contains mostly owned flats, in contrast to the other sections.

23 Disbursements for feasibility studies and profitability analyses for individual projects are already considered in the investment disbursements.

24 According to the interview partner, the projection of 3–4 per cent of the costs of capital appears appropriate for the CDC.

Figure 17 – Le Grand Ensemble Lochères

3.2.2.2 Project

There is a former young women’s residence on the boulevard Albert Camus from the 1970s, which was in need of repair and was vacant for more than ten years. During a compulsory auction in 1997 several private individuals originally from the housing estate jointly acquired the building and its parking places on another plot of land for approximately € 305,000 (2 m FF). The owners’ plans to redesign the building as a retirement home or office building failed because of the costs related to the transformation of the building.

Together with the government of the département and the CDC, the owners developed the concept of a new office building. The legal and organisational framework for the project was consequently planned and contractually agreed. The central points of discussion in the nego- tiations between the département, the CDC and the private partners were the value of the property and the construction and equipment standards of the building. The private landow- ners formed the SARL25 _{GECO Promotion and transferred the property to the newly founded}

SARL Foncière Camus. Four private individuals hold 67 per cent of this company via the SARL GECO; the CDC holds the other 33 per cent. The owners of the SARL GECO Promo- tion all originate from the neighbourhood and are partly rooted in the large Jewish community

there. The SARL Foncière Camus is the legal framework of the development project. On be- half of the SARL Foncière Camus, the GECO Promotion is responsible for the day-to-day management of the project.

After tearing down the old building, a new, seven-storey office and commercial building was constructed. The building has approximately 900 m² of space for commercial use on the ground floor and approximately 5,000 m² of space for office usage above. The foyer in the entry area is manned all day, which adds to security in the building.

25 A société à responsabilité limitée (abbr. S.à.r.l. or SARL) is the legal form of a limited liability company in France.

Figure 18 – Foncière Camus office building

The building is presently 95 per cent let. The ground floor is currently occupied by a restau- rant, a bank branch, various businesses (optician, massage parlour, beauty centre), doctor’s practices and a fitness studio. The office floors are let to diverse companies (solicitors, audi- tors, telecommunications). The approximately 800-m² first floor is leased to the city of Sar-

celles and only partly in use at present. Because of the flexible construction, the smallest

leasable office space is approximately 50–60 m². This has enabled 40 companies with a total of approximately 200 jobs to settle there. Approximately 60 per cent of the companies have moved into the building from different parts of Sarcelles. The other companies have moved here from outside the area. The majority of the companies residing in the building belong to the neighbourhood’s Jewish community.

3.2.2.3 Financing

The SARL Foncière Camus project company was established specially for the development and financing of this property; between the two investors, the CDC holds 33 per cent and GECO holds 67 per cent26_{. The CDC’s equity investment of € 278,850 came from the CDC}

Projets Urbains fund, which existed until mid-2007. GECO Promotion’s investment was in the

form of property worth € 450,000, including the value of 75 parking places for the property (also in the possession of GECO and located outside the property), plus a cash investment of € 107,778, so that the real estate company began with a total of € 836,628 in equity. The SARL Foncière Camus real estate company purchased the property from SARL GECO in 2005 at a price of € 800,000. The construction costs for the new office building were planned at € 7.57 m, including € 300,000 to demolish the old building. Together with the ac- companying fees, insurances and other costs totalling € 19,000 and the parking places (€ 450,000), the total investment costs in 2006 came to € 8.839 m. These investment costs were fully recognised in 2006 as tangible assets and were subject in the first 10 forecast

26 Hence, the investment ratio does not correspond to the 50/50 ratio targeted in the fund model. According to information from the interview partner at the CDC, the 50/50 ratio had been rejected by GECO.

years to regular depreciation of € 520,000 p.a., so that the balance sheet for 2007 showed (€ 8.839 – 0.52 =) € 8.319 m:

in T Euro 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Tangible Assets 8.319 7.800 7.280 6.761 6.241 5.721 5.202 4.682 4.163 3.643 3.454 3.264 3.075 2.885 0 Trade receivables 23 42 43 44 45 46 46 47 48 49 50 51 53 53 54 Cash and cash equivalents 59 531 646 786 944 1.090 1.249 1.426 1.623 1.840 2.043 2.204 1.938 1.618 8.778

Total Assets 8.402 8.373 7.969 7.590 7.230 6.857 6.497 6.156 5.834 5.533 5.547 5.520 5.065 4.556 8.832 Share capitall: - GECO 450 557 557 557 557 557 557 557 557 557 557 557 557 557 557 - CDC 0 279 279 279 279 279 279 279 279 279 279 279 279 279 279 Statutory reserve 0 0 0 0 0 0 0 0 0 0 0 2 19 38 57 Grant reserve 1.248 1.196 1.144 1.092 1.040 988 936 884 832 780 728 676 624 572 0 Accumulated deficit 0 -729 -877 -906 -907 -877 -852 -795 -706 -584 -426 0 0 0 0 Net profit/ loss for the year -729 -148 -29 -1 30 25 57 89 123 158 465 347 371 373 3.921

Total Equity 969 1.155 1.074 1.021 999 972 977 1.014 1.084 1.190 1.604 1.861 1.851 1.819 4.814

Longterm loans:

- PRU CDC 3.250 3.126 2.998 2.867 2.733 2.595 2.453 2.307 2.157 2.002 1.844 1.681 1.514 1.342 1.166 - LOan Crédit Mutuel/Banque Pop. 3.250 3.105 2.953 2.795 2.630 2.458 2.278 2.091 1.896 1.693 1.480 1.259 1.028 787 535 - Additional loan Crédit Mutuel 800 763 724 683 640 595 548 498 446 391 334 273 210 143 73 Rent deposits 110 199 203 207 211 215 219 224 228 233 237 242 247 247 252 Trade accounts payable 18 17 8 9 9 13 13 13 14 14 19 19 20 20 20 Taxation payable 5 8 8 9 9 9 9 9 10 10 30 184 196 197 1.971

Total liabilities 7.432 7.217 6.895 6.569 6.231 5.884 5.520 5.142 4.750 4.343 3.944 3.658 3.214 2.737 4.018 Total equity and liabilities 8.402 8.373 7.969 7.590 7.230 6.857 6.497 6.156 5.834 5.533 5.547 5.520 5.065 4.556 8.832

Figure 19 – Planned balance sheet for the SARL Foncière Camus real estate company (in thousand €) The project financing is itemised among the liabilities and equity on the balance sheet of the real estate company. In addition to the mentioned capital investment of the two partners, the company also received an EFRE grant of € 1.3 m in 2006 (= 15 per cent of the project in- vestment sum), which is amortised equally over 25 years pursuant to French accounting guidelines and is thus booked in 2007 at (€ 1.3 m – € 0.52 m =) € 1.248 m under the equity item “Grant reserve”. According to the CDC, this is a very risky project from their perspective. Because of the very low equity of the private partner, GECO, and the very low risk-related in- vestment sum of the CDC, the project would not have been realised without the EFRE grant of 15 per cent of the investment sum. This is why the CDC could not stick to its targeted fi- nancing structure of 30 per cent of equity (see Figure 14) here.

The project is financed with 88 per cent debt. € 7.3 m came from long-term bank loans, in- cluding € 3.25 m from the CDC in the form of a prêts renouvellement urbain (PRU) urban re- generation loan. Another € 3.25 m loan was granted by two commercial banks (Crédit Mutuel and La Banque Populaire)27_{, plus an additional loan of € 0.8 m from Crédit Mutuel alone.}

The PRU to the real estate company was granted at an effective interest rate of 3.03 per cent p.a. and its interest rate is linked to the savings interest rate of the tax exempt Livret A sa- vings accounts, and therefore variable. The commercial loans from the Crédit Mutuel and the

Banque Populaire effectively cost 4.48 per cent p.a. for superior collateralisation of the loans

with the property; the additional loan cost 5.00 per cent p.a. Both are fixed interest rates. Guarantees are tied to the PRU. For example, in general 50 per cent of the amount of the

PRU is guaranteed by the local authorities, i.e., if the debtor is not able to make its annual

payment, this will be paid by the guarantor. This guarantee is granted free of cost by the local authorities. Another condition of the guarantee of a PRU is that the remaining 50 per cent of the loan amount must be guaranteed by a bank. In the case of the Sarcelles project, no commercial bank was willing to grant this guarantee28_{. In this extraordinary case, a special}

27 The loan was given as a first mortgage with additional transactions costs (taxes, notary, registration) of € 35.000.

28 According to information from the interview partner at the CDC, the banks did not feel certain that, in the event of insolvency, there would be any cash left after satisfying the senior loans of the Crédit Mutuel and the Banque Populaire, so that the commitment was assessed to be too risky.

fund of the CDC extended the guarantee. This created additional, nonrecurring costs of € 85,000 for concluding the urban regeneration loan.

3.2.2.4 Empirical analysis of the real estate company

The income statement forecast of the SARL Foncière Camus real estate company over the next 15 years29 _{(viewed from 2006) makes it clear that a (steadily rising) profit for the year is}

not anticipated before 2013. Nevertheless, the true operating profit, as the difference of property rental income less operating expenses, is already positive starting in 2008. The high, negative financing costs each year stem from the annual interest for the three loans.

in T Euro 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Property rental income 552 1.008 1.029 1.050 1.072 1.093 1.116 1.139 1.162 1.186 1.210 1.235 1.260 1.263 1.289 - Operating expenses 931 941 869 876 884 928 937 946 956 965 685 696 707 717 729

= Operating Profit -379 67 160 174 187 165 179 192 206 220 525 539 553 546 560

- Financing costs -402 -267 -242 -227 -209 -192 -174 -156 -135 -114 -92 -70 -48 -38 -29 + other income 5252 52 52 52 52 52 52 52 52 52 52 52 52 52 5.351

= Profit for the year -729 -148 -29 -1 30 25 57 89 123 158 485 521 557 559 5.882

- Accumulated loss 729 877 906 907 877 852 795 707 584 425 0 0 0 0 0

- Taxes 0 0 0 0 0 0 0 0 0 0 20 174 186 186 1.960

= Profit after Taxes -729 -148 -29 -1 30 25 57 89 123 158 465 347 371 373 3.922 Dividends 0 0 0 0 0 0 0 0 0 0 0 38 330 353 5.168

Figure 20 – Planning income statement for the SARL Foncière Camus real estate company (in thousand €) The planned pre-tax return on assets of the project comes to 6.9 per cent; as the planned re- turn on equity from the project, a value of 14.6 per cent is used for both investors30_{. Exami-}

ning the starting parameters of these two yields reveals that the assumed property rental in- come on the one hand and the assumed sales price of the office centre in 2021 on the other are particularly sensitive.

Looking at the rental situation (as of March 2008), it can be affirmed that the rental forecasts will be maintained. At present, the office centre is 95 per cent leased at an average rent per m2 _{of € 161 p.a. This is in line with the planned rate. All rental contracts are for at least three} years. The tenants represent nearly all industries; 60 per cent come directly from Sarcelles. Because of the local clientele and the strong diversification, it can be assumed that the rental situation will meet forecasts. Whether the planned sales price of € 8.371 m (after tax31_{) will}

be realised in 2021, however, appears doubtful to say at least. In order to justify such a sale price for a building which will then be approximately 15 years old, the value of the location of the office centre will have had to appreciate so much that the increased value of the land more than compensates for the loss of value in the building (corresponding to the deprecia- tion). As Sarcelles is located in a zone where public monies will be invested in urban deve- lopment in the future, it can be assumed that the area will appreciate in value; however, it is doubtful that this will justify a sales price worth 3.5 times the remaining book value (€ 2.885 m, see Figure 19).

29 The CDC has a maximum investment horizon of 15 years for its holdings. For this special real estate com- pany, both sides contractually agreed not to exit the company within the first five years after construction is complete.

30 The return on assets is the sum of the internal interest rate for the project payments plus the total investment cost of € 8.839 m (see chapter 3.2.2.3). The project payments are calculated by subtracting the (non-cash) amortisation to the real operating profit. By the same token, the return on equity is calculated based only on the equity investment (see Figure 19) and the dividends.

31 The sales price of the office centre is recorded as a nonrecurring gain in 2021 (see ). This is the sum of the nonrecurring gain from the sale of € 8.371 m plus other nonrecurring income of € 52,000 (= grant spread out over 25 years) minus the nonrecurring expenses of € 3.072 m (= amount of grant yet to be amor- tised).

3.2.2.5 Urban development and planning

As legally stipulated, the Plan Local d’Urbanisme (PLU) of the city of Sarcelles includes statements regarding long-term urban development and detailed regulations on the use of the land. The statements of the PLU on urban development also address the economic de- velopment of the large housing estate. The mixture of various uses along the primary axis of the Lochères estate should be maintained and strengthened. The planned construction of a new tram through the area, together with a redesign of the public spaces, should improve access to the area and promote its economic development.

The large housing estate is one of the focal points of French urban regeneration policy and has been declared a Zone Urbaine Sensible (ZUS), a Zone de Redynamisation Urbaine

(ZRU) and a Zone Franche Urbaine (ZFU). As such, this area benefits from public subsidies

and is tax-exempt. The declaration as a ZFU in particular means that companies with at least 50 employees who settle in this area enjoy tax advantages and pay lower social contributions if residents of this neighbourhood fill one third of their positions.

Within the framework of diverse urban regeneration programmes, several plans have been made to regenerate the large housing estate. In its Grand Projet de Ville agreement of Sep- tember 2001 for the cities of Garges and Sarcelles, the cities, regions, representatives of the federal government and the CDC laid down comprehensive goals for the development of various urban problem areas. This included the development of various urban, economic and social goals and measures.

In 2003 the Agence Nationale pour la Rénovation Urbaine (ANRU) was established to coor- dinate various political initiatives for urban generation and individual aid programmes. To- gether with the département, the regions and cities, the CDC and the housing associations, complex urban regeneration projects and the necessary aid were contractually agreed. These specified the targets of the Grand Projet de Ville and made the funds available to real- ise the projects. From 2004 to 2013, the ANRU is providing a total of more than € 12 bn from diverse sources for urban regeneration projects.

For the first part of the Lochères large housing estate, comprehensive urban regeneration measures were contractually agreed for the 2007–2014 period. The focus of these plans lies on increasing the value of buildings in the area. Accordingly, 540 flats will be torn down and 468 flats for families and seniors within the area and another 72 flats outside the area will be newly built. Furthermore, 1,046 flats will be renovated and the public and private free space for 1,146 flats will be defined and improved. Support will be offered for the families, which have to move because of these steps. The ANRU is making a total of approximately € 98.8 m available for this project. Comparable urban regeneration measures designed for similar purposes are being prepared in other parts of the large housing estate.

Parallel to these urban regeneration steps, a new tramline will be built in the next few years to better connect the housing estate with the surrounding areas and the train lines. The Fon-

3.2.3 Analysis of the case study

3.2.3.1 Public interest

The Foncière Camus project will offer office space for companies in the large housing estate. At present there is little space available in the estate for companies and service providers. Attracting new companies and ensuring the vitality of the existing ones will strengthen the economic activity in the estate. This should also help to lower unemployment in this neighbourhood. At the same time, the project improves the image of the neighbourhood and thereby makes it possible to decrease the prejudices and fears of other investors and resi- dents regarding the large housing estate. The public interest in the project is therefore mani- fold. In addition to strengthening the economy of the neighbourhood, it has a positive impact on the image of the area.

The investments of the CDC in urban development projects are generally focused on pro- blematic areas of urban development. There is thus a public interest in aiding these invest- ments. At the same time, the construction of rental flats, for example, makes a desired offe- ring available that is not provided by the market. The CDC is thereby active in areas which private investors do not operate in because of the high risk or comparably lower returns.

3.2.3.2 Integrated urban development

The Foncière Camus project fits into numerous urban regeneration concepts for the neighbourhood. In the various agreements and plans for urban regeneration, it is mentioned many times that the neighbourhood should be strengthened economically by attracting com- mercial use. Various urban regeneration areas have also been identified with this in mind. The declaration as a ZFU in particular is based on the intended alliance between economic and social aims. The exemption from taxes is designed to attract companies to the area. This exemption is restricted, however, to companies with a certain number of positions available to residents of the neighbourhood.

The designation as the Grand Projet de Ville in particular ties together diverse goals. In con- trast, the specifications agreed to later within the framework of the agreement with ANRU and the other partners are mainly focused on improving the area through construction. There is no comprehensive plan which ties together all of the various measures. Nevertheless, there are lateral relationships and references between all of the concepts and plans. The par- ties involved are aware of the diverse concepts, which are perceived as a unified strategy for improving the neighbourhood.

The CDC's investment in the urban development project was originally linked to the areas le- gally identified for urban regeneration (ZUS, ZRU, ZFU). This ensured that there was a close connection between these investments and the goals of urban regeneration. In the past few years, this connection has been eliminated in order to be able to act more flexibly and in the areas directly adjoining the urban regeneration area. Even without this formal connection, however, the urban regeneration areas remain in the focus of the urban development pro- jects financed by the CDC. Agreement with regional and communal policies also occurs in- formally. Even though agreement from communal leaders is not a prerequisite for the pro- jects, the CDC only invests in projects which are supported locally.

3.2.3.3 Revolving allocation of funds and profitability of business opera- tions/efficiency

According to the business plan of the real estate company, the project in Sarcelles under analysis shows a project return of 6.9 per cent before tax and a return on equity for both partners of 14.6 per cent. The profitability forecast here and the revolving allocation of in- vestment funds, however, has to be viewed in the context of various issues.

To reach these figures, it is crucial to sell the property at the sales price indicated in 2021. Assuming a sales price at the remaining book value of € 2.885 m yields a return on assets of 5.0 per cent compared to the previous 6.9 per cent. The return on equity even falls to 7.5 per