Demolish everything and rebuild new. This is the solution that was chosen for the Servette buildings evacuated in emergency in October because of the risk of collapse. Owner of two buildings out of three, the real estate fund La Foncière preferred this solution to a renovation. He has applied for a permit to do so. Its director Arnaud de Jamblinne explains this. The third building, which housed Migros, is expected to suffer the same fate.
Arnaud de Jamblinne, why demolish and rebuild rather than renovate?
Both options were possible. Due to the poor quality of the concrete, however, it soon appeared preferable to reconstruct. Especially since, to secure the building, we had to reinforce it with a forest of almost 1600 props which would have made complex and slow renovation works. The reconstruction allows us to modify the typology of the apartments so that they better meet demand. With this solution, we are also reducing the rent-free period, which was not planned.
What is the cheapest solution?
The reconstruction, which also weighed in our choice since we will suffer very significant losses on this project.
This will give ideas to other owners, tempted to do the same.
Getting tenants out is never a good idea. We had to do it to keep them safe. In addition, the overall financial results of this project are very poor and cannot be used as an example to follow.
Future housing will be subject to the Demolition Law (LDTR). Does that have
a strong impact?
Rents will be controlled and therefore below the market. This does not prevent the operation but it delays the moment when the building will have the average yield that we are targeting, between 4 and 5%.
How much will these setbacks linked to the risk of collapse cost you?
We had already carried out a large part of the elevation of the building, now in pure loss. We had to secure the building and we also wanted to be generous in helping the tenants to relocate. Now we have to rebuild everything. In all, we estimate the losses on the project at around 10 million francs. We will absorb them from our reserves and this will not affect the dividend paid to our investors.
Will your insurance cover these costs?
The insurance considers at this stage that there was no claim since the building did not collapse. But if we have evacuated the building, it is precisely to avoid a disaster. Negotiations continue. This is an unprecedented case study.
What is the situation of tenants today?
Most of the 62 people who occupied the 26 units spent the holidays in their new apartment. Two tenants are still in apartment hotels. Most of the traders on the upper floors have also found premises. For arcades, it takes longer. But we think everyone will have found a satisfactory solution by the end of January. We have been generous. The situation was dire for all of these people, we were aware of it and we did what we could to ease the situation.
“We are going to build 200 homes in Geneva”
La Foncière has 47 buildings in Geneva. Have you checked their strength?
We plan to have all our buildings built between 1960 and 1980, which have the same architectural structure as that of La Servette, checked in 2020.
You have raised ten buildings in Geneva. A good deal?
The popular will is to build the city in town to avoid the sprawl of the territory, which notably involves the elevation. In less than ten years, since 2012, we will thus create 200 housing units by investing nearly 100 million. For us, this is neither a good nor a bad deal. We only carry out the project if it allows us to maintain profitability in line with our strategy. Raising is often an opportunity to renovate facades and improve insulation.
Your park includes rental in the city center, almost no offices. Why?
We focus on the middle and lower middle residential in the urban areas of the Lake Geneva region. We aim for stability for a maximum occupancy rate. It is a rather defensive strategy that allows us to cross economic cycles.
When one of your tenants pays 1000 francs in rent, where does the money go?
The pension funds are the main holders of our units. Dividends are therefore used primarily to pay pensions for retirees. This corresponds to about a third of the income. The rest is allocated, in order, to taxes, renovations and maintenance, management fees and debt.
Do you make acquisitions?
Given the high demand from investors such as insurance, who have huge liquidity and drive up prices, the market is generally too expensive for us. In 2020, we will still proceed with a capital increase of 100 million to finance our renovations and the construction of a large project of more than 200 housing units in Geneva. This is an opportunity that we are in the process of finalizing with a social institution owning beautifully situated land.
Created: 13.01.2020, 06h51