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”.