Great Portland Estates at Deutsche Bank Securities Real Estate Outlook Conference - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

JEREMY ANAGNOS, CFA, SENIOR REAL ESTATE ANALYST, DEUTSCHE BANK: Welcome to the European real estate panel. My name is Jeremy Anagnos; I'm the senior real estate analyst at Deutsche Banc covering European property companies. I know we're starting a bit later today and we are going to finish hopefully on time, 4 o'clock, mostly because one of our panel members needs to get on a plane pretty soon.

Onstage with me are four of the leading property company executives from France, Spain, and the UK. We have some slides just to go over some introductions here. We'll get back to that. Starting on my left is the chief executive of Gecina, Mr. Serge Grzybowski. Gecina is a Paris listed company, investing solely in France. It is equally weighted in its investments between commercial properties and residential properties. And all primarily located within the Paris region.

Next to Serge is the chairman of Metrovacesa, Mr. Joaquin Rivero. Metrovacesa is focused on the Spanish property market. And the company invests in and develops commercial property, primarily offices, shopping centers and hotels. That's about 60 percent of its asset value. The rest of the company's investments are in developing homes for sale and it manages a land bank for homebuilding.

On Joaquin's left is Toby Courtauld, the chief executive of Great Portland Estates. Great Portland invests in and develops offices primarily around the street by which the company is named in the west end of London. Last, we have Ian Coull who is the chief executive of Slough Estates. Slough is based in the UK near Heathrow Airport. The company has investments and developments in France, Germany, Belgium, and here in the US. Almost three-quarters of the company's portfolio is business space.

Now, that you know who we are, let me give you a little bit of background on why we are here today. European property markets, both direct and indirect, are undergoing significant structural changes in Europe. These changes are leading to opportunities for growth. The total estimated size of the commercial property market in Europe and the UK is about EUR8 trillion. However, 72 percent of this is owner occupied property leaving about EUR2.3 trillion of what we would call investable property.

Maturing corporate strategies and the need for governments to raise capital and fund money are leading to sales of these owner occupied properties back into or into the investment property market. Examples are seen all across Europe. We've seen Prada (ph) in Italy, Carrefour (ph) in France, Kingfisher (ph) in the UK and even Deutsche Bank in Germany and in London. So the size of the investment property market is expanding in Europe and this trend of owner occupation is starting to turn. This is attracting many new investors. At the same time, the listed property market is also in the midst of a change that I believe will lead to a much larger public securities market.

Currently the market capital of the listed sector is EUR72 billion. It represents only about 1.5 percent of the total equity market in Europe. Moreover the total asset value, which is about EUR135 billion, is only about 1.6 percent of that 8 trillion total property market in Europe. The listed sector, however, is set to go through a massive transformation. REIT structures are being discussed in nearly every country and have been already introduced in France. We see momentum behind this trend and expect other countries to follow in the coming years.

France introduced, as I mentioned, legislation in 2003 which has allowed for changes in the tax structure. The introduction of SIACs were born. And we now have nine companies, including Gecina, that have adopted this new status. So, I'd like to start with Gecina. And Serge, if you can give us some more detail on the SIAC and what benefits it will bring to your company and shareholders.

SERGE GRZYBOWSKI, CEO, GECINA, S.A.: (indiscernible) the SIAC system, I would say that it's a tax efficient system, obviously preferred in a less politically correct niche I would say it's a tax transparency regime. Tax transparency regime, but it's not exactly free. As we opted for such a regime, we have to pay for (indiscernible) tax, but the (indiscernible) tax was calculated on a (indiscernible) on the development at the rate of 16.5 percent against the previous regime which was 35 percent.

Thanks to this option, as you can understand, we create valuation because of the difference between the previous tax regime and the new tax regime. As far as (indiscernible) is concerned, the improvement of the (indiscernible) was by 20 percent. But also, we also are able to provide higher dividend because we set corporate taxes and we are able to optimize the net results of the Company.

And the third reason we had to opt for the new tax regime was that it offered more flexibility in terms of disposals program. Now the disposals program can alter without capital gain tax, and we can decide and choose the asset to be arbitraged without taking into account the fiscal issue. So, I think that higher dividend, improvement in the entity, and improvement in flexibility of the trade (indiscernible) to have opted for such a new tax regime.

JEREMY ANAGNOS: And do you see any changes in your strategy that may result from this new tax structure?

SERGE GRZYBOWSKI: Well, our strategy was best not on a tax consideration but on economic criteria. And we simply go on the strategy we pursued that is to say the improvement of the average yield of our assets portfolio. And that's true that the SIAC regime is a great help for us in such strategy because we can pursue the disposals plan without any taxes in terms of capital gains, which is very excellent (ph) for us.

JEREMY ANAGNOS: And in regards to the broader French property market, what impact do you think that the SIAC will have on the structural or the investment property market?

SERGE GRZYBOWSKI: That could be paradoxically because the first picture we could see from the French market is that the site of the market …