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Allan Saunderson is managing editor of Property Finance Europe and a contributor to GlobeSt.com.

PARIS-French REIT Gecina has sold a 92,000 square meter office building in the west of Paris for €98 million as part of a disposal program that should exceed its target of €700 million this year, providing the proceeds to meet a €540 million bond redemption in 2010 and other debt obligations.

The company said the latest disposal concerns an office building in Saint Quentin in the Yvelines region fully leased to the Thalès electronics group. In the first half of 2009, Gecina carried out disposals totaling €226 million, including €157 million for seven office buildings in Paris and suburbs and €69 million for 386 residential units.

It had firm offers at end-June representing €555 million in further disposals that should be completed in the second half, some €180 million in July, covering residential and office buildings. In this way, it expects to exceed the upper range for its initial disposal target of €600 million to €700 million in 2009. Sales concern assets it no longer considers compliant with its strategy, notably on account of their size or location. Gecina said it aims, “to continue with its arbitrage policy to further improve the return on its portfolio and capitalise on a market offering numerous opportunities.”

The third largest French REIT/SIIC managing a portfolio of around €12 billionn, Gecina is embroiled in controversy over actions of its management, notably CEO Joaquin Rivero, who faces legal complaints from small shareholder group ADAM over, among other matters, its purchase of a stake in the Spanish company Bami he part-owns, and a Luxembourg holding firm to which Gecina lent over €200 million at very low interest rates. Shareholders at the annual meeting last month were defeated in a motion calling for his removal only due to voting weights of major shareholders Metrovacesa, the Spanish listed group Rivero formerly headed, and French life insurer Predica, part of Credit Agricole group.

Gecina has nearly €300 million in undrawn credit lines and immediately available facilities. Despite the impact of value adjustment and consolidation of subsidiary Gecimed on group debt, it said banking covenants are in compliance. The interest coverage ratio improved considerably in the first half, reflecting the reduction in the cost of debt to around 3.5% from 4.18% in 2008. In light of forecasts for disposals, it expects to cut debt and have the cash, even without any new sources of financing, to cover all repayments in 2009 and 2010. These primarily concern the redemption of the balance on the 2010 bonds for €540 million.

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