Alain Taravella (Président d'Altarea) : "L'immobilier est un rempart contre l'inflation !"

Yes, it was a complicated year because we had the war in Ukraine at the beginning of the year which triggered a number of phenomena, notably various cost increases in construction that we had to endure, but I would say the most important thing is since the beginning of 2022, the rise in interest rates. For 10 years we lived through a period where interest rates were almost zero, mortgage rates were at 1%, it was interesting to buy and borrow over the long term. Now in the space of 9 months things have changed.

I think we have never experienced something so violent and unprecedented. Rates like today are not unprecedented, it was like that 8 or 9 years ago, it was 3-4%, that's a dramatic rate. But it's the moment of inversion that causes issues. At the same time, you have an increase in costs, an increase in interest rates, and that makes apartments more expensive, it costs more to investors and buyers, and thus removes purchasing power from a certain number of people. We have to adapt. And at the beginning of 2023, what do we say about the rise in costs of materials and energy? Is it behind us? There is still some. You want me to tell you the truth? I don't know. On the rise in costs, it varies by region and by project, but I think the worst is behind us, but there will still be some construction cost increases. On the other hand, regarding interest rates, it will continue to grow.

No, the bulk of the movement is done, we have to adapt. I think we need to learn to start from the clients, from what clients want. Maybe we need to adapt, make apartments a little smaller, better organized. That's a job. Well, I have a long experience in real estate, I must be the absolute senior in this field, I have lived through crises. During a crisis, a certain number of people cannot buy, those who can buy can take advantage of good deals, and then it picks up again in a year or two. 2023 will be a difficult year, but after that it will pick up again, it's logical. We are in the office market, we are at the bottom of the pool, we will stay there, I think, during 2023.

On 2022, just to quickly go back, a 13% drop in housing reservations to 10,000 units, but at the same time we did better than the market which dropped 6%. So what do we say? We say that we will be... because we did better than the small ones, even if it's not good. Actually, it's 25%? No, we dropped 13%. We suffered for sales to institutional investors who withdrew a bit from the market, but we sold about as much to individuals. So ultimately, sales to individuals held up, while institutions... We adapted our offer, we now have an offer at the right price. We made the necessary efforts to do so, and we did or not. They adapted because there is a turnaround in the existing residential market. In short, the boss of La Fontaine told us a few weeks ago when he came to see us that since autumn, prices have turned around. Some prices have dropped in some regions, not in others. We are in a phase of stabilization, slight price drops, price adaptation. We help people to buy, we launched a campaign where we cover part of their monthly payments for four years, because it takes time, there is inflation. Because even though real estate today has all the bad news, there is one good news that is not good news for the common mortal, which is inflation. Inflation is a hedge against inflation. People who buy today, in two, three, four years will see that their real estate has increased in value, that it has covered itself, and that it is easier for them to buy.

Well, in this difficult in-between period, some projects are readjusted, reconfigured, others are abandoned. Where are we today? Yes, of course. We are lucky to have an extremely large pipeline of operations, so we are selective, we renegotiate, we make sure. In short, our clear strategy on the apartments we are currently building: we have to adapt to the market, and we make price adjustments on what we haven't launched yet, on which we will buy land, we re-discuss with everyone so that our clients can buy at the right price.

Because it was the beginning of Altarea, it's my first deal, it has a special flavor, the first deal. So 2023, we understood, it will be a difficult year, the rebound is impossible to adapt, you don't read coffee grounds, but what is 2024, 2025, what is the sign of the turnaround we can watch for? The market has to adapt, I think the turnaround will be from mid-2024.

In the meantime, we will move forward, we will make offers, we will propose to the French to buy. Since the beginning of the year, the French are buying apartments, they want to invest in real estate. Who can regret buying an apartment 10 years later? Who can? So what we see is that you make more or less good deals, but there are bargains to be made now in new construction. I don't know if there are bargains, it's always a good deal to buy an apartment, it's a long-term investment. We are not discounting, we are adjusting, we just set prices, we sell at the price, and it's always a good deal to buy. A credit, we know it's complicated to get credit now even though the usury rate has been raised, it's complicated to get credit, so it's more expensive, and not everyone can get credit. We help by paying part of the monthly payment at the beginning, because after inflation will... Actually, the subject is that you buy, you have a constant monthly payment over 20 years, your income increases, especially during inflation, so yes, we help a little at the beginning, but what I mean is that buying an apartment, whether to live in or as an investment, is not evaluated in the moment, it's a long-term view, it's a way to preserve your capital.

We have found it. We bought Youdum, which is the only wood-only developer in France that makes 1,000 homes. We had bought 50%, we bought the other 50% last week, so it's the complete team that makes 1,000 homes, which will quickly become 2,000, 2,005. Yes, that's it. And besides, that's the specialist, but all our brands, as I said, have low-carbon programs, work on low-carbon. Our concern today is to have the supply chains that allow us to do it. Clients want it, institutional clients want it. We need to be able to supply the wood. The first wood developer in France is forced to buy its wood in Austria, there is not enough wood supply chain in France to supply us, so there is everything to build.

Of course, we couldn't buy Primonial for many reasons, but that's not the subject. So we launched internally an asset management company that will do real estate management from scratch, I think from the start. And real estate savings is an extremely important sector for us.

We wait for justice. It is excessive to demand that much. I can be clear: we absolutely wanted to do this deal, if it didn't happen, it's clearly not our fault but the sellers'. They still disagree with me. They demand money, I also demand money from them. How much? I'll put it on the public record, so I also demand from them. And I have complete confidence in justice. We publish our accounts, we gave all the files to our auditors, and we concluded together that there was no reason to provision anything, no provision at all. So I am serene. After that, justice is always a bit slow in France, end of the year, beginning of 2024, I don't know, it takes time. It's a complicated case, it needs time to happen.

I cannot be satisfied with the performance of Altarea's stock since it has fallen. It's true that compared to all others, not just the one you mentioned, we are doing rather better. Among real estate companies, property companies, development, we pay good dividends. It's that maybe we don't have the pep of luxury or oil, but I think it's a shame to buy, but I'm not going to advertise the stock. We are in the city, we respond to fundamental needs. We have a huge market, the city market is huge. There is volatility, there are ups and downs, but I am sure that in two or three years our activity will have resumed. We commit to paying dividends in the coming years, which gives a yield of about 8% on today's stock price.