Canada Pension Fund Begins $1.3 Billion Spending Spree on Paris Real Estate

Businessman holding small model house in his hands

The Ontario Municipal Employees Retirement System (OMERS) has made its first investment in what’s likely to be a line of many in Paris real estate.

The first purchase: a $337 million office building in central Paris. The pension fund says it plans to invest another $850 million in Paris real estate over the next three years.

Reported by the Financial Times:

Oxford Properties, the real estate arm of giant Ontario fund Omers, has bought a 237,000 sq ft building in Rue Blanche, central Paris, from the Carlyle Group for €263m.

Its move into Paris is the fund’s first step into continental European offices.

Michel Vauclair, an Oxford Properties senior vice-president, said it aimed to build up its Paris portfolio to €1bn in the next three years.

It will focus on “assets where we can drive value through active asset management . . . and where we believe that current values do not reflect future market improvements”, Mr Vauclair said.

Until recently the Paris property market has been sluggish, partly as a result of the country’s economic weakness and political uncertainty. But Mr Vauclair said that Oxford Properties sees “the prospect for significant growth to come through infrastructure improvements and a broader economic recovery”.

OMERS isn’t the only organization buying up Paris property. In fact, many foreign investors are flocking to the city. From the Financial Times:

Janet Stewart-Goatly, a senior capital markets director at property advisers CBRE, said the Paris market had seen a 60 per cent increase in transactions year-on-year as foreign investors flood into the market.

“If you’re looking to build up your international portfolio, you can’t ignore Paris,” she said. “There is a massive weight of capital seeking to invest.”

As a result yields are about 4 per cent for Paris’s central business district and 5.5 per cent in the La Defense business cluster, she added.

La Defense had a 12 per cent vacancy rate last year – partly as a result of a handful of large companies relocating to the Paris suburbs – but vacancies are now falling as more businesses take up space, Ms Stewart-Goatly said.

OMERS says it is targeting Paris due to an improving economy coupled with the likely leveling-off of its high vacancy rate, which the fund says is “temporary”.

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