At the end of September this year, French property company Primonial REIM bought an office asset in Bordeaux from CBRE Global Investors for €18.7m. The acquisition of Le Millennium 1 complex in the city, in France’s south-west, may not have been among the largest transactions by volume in the country’s real estate market this year, but it was Primonial’s fourth office purchase in a regional city in the past few months.
In times when foreign investors looking at France focus increasingly on Paris and its immediate surroundings, Primonial REIM is also targeting prime assets outside the capital’s region of Île-de-France.
The Paris-based real estate investment manager, a subsidiary of investment management Groupe Primonial, which controls the group’s SCPI and OPCI vehicles, was launched last year, when its funds collected €250m and invested €400m in France’s real estate market. In the first half of this year, they raised €140m and invested €230m in real estate assets.
Of the company’s SCPI vehicles focusing exclusively on the office market, the best performing so far this year is Primopierre, which invests in France’s “grandes metropoles”, or major regional cities, as well as in Paris and in Île-de-France, says Primonial REIM board chairman Laurent Fléchet.
“We have invested in office assets with low energy consumption and high performance,” he says. Owing to high prices and the lack of newly built or renovated prime product available to investors in Paris, regional cities with easy access to transport are generating increasing interest among investors. “Paris remains very pricey,” Fléchet says.
Low Paris yields
Yields for prime office assets can be as low as 4.7% in the capital city’s central business district, according to research by consultant BNP Paribas Real Estate. In Primonial’s target destinations, the main regional cities of France, prime yields are around 6%, according to BNP Paribas RE’s research. “In Lyon they are at around 7%,” Fléchet says.
Earlier this month, Primonial REIM agreed to buy an office development to be delivered in 2014 in Lyon, the Rhône Alpes region’s capital, in the country’s south-east, from Financière Duval’s local subsidiary CFA for €18.6m. The transaction followed the REIM’s acquisition, announced only days beforehand, of an office asset, also called Le Millennium, from a private investor for €15.5m.
Premonial’s retail vehicles also target regional cities. In September, Primonial REIM acquired a portfolio of 10 retail galleries on behalf of its OPCI institutional fund PREIM Retail 1 from French shopping centre specialist Mercialys for around €150m. The assets, whose floor area totals 64,080 m2, are spread across France’s regional cities and are linked to Géant Casino and Leclerc hypermarkets. Their tenants include Casino Restauration, Brico Dépot and Feu Vert.
“Our retail investments focus on convenience stores, including shopping galleries, food stores such as those of Casino and Leclerc and so on,” says Fléchet. “We target medium-sized assets within the food and the convenience store sectors.”
Primonial’s retail investment strategy is, he says, based on the changes in consumption habits brought about in the past few years by e-commerce, which is slowly replacing shopping in major store chains and big shopping centres. “Convenience stores will remain,” Fléchet says. “But I am not sure how long retail parks will be able to resist.”
Primonial REIM also targets alternative real estate classes such as health and education. In September, the REIM launched an SCPI vehicle focused on preschools, schools and student residences as well as on clinics, laboratories and retirement homes. Fléchet said that, although these kinds of assets are usually acquired, in France, by institutional investors, the Primovie vehicle is invested only by private investors.
“It responds to an increased need for health and education, due to demographic and economic factors, which we find very interesting,” he says.
Fléchet adds that the French economy is expected to experience weak growth in the coming months. “But demand for prime assets, core and core-plus, will remain strong,” he says.
He adds that the company has no plans to expand its portfolio abroad.
www.primonialreim.com
