ING Management Limited, Responsible Entity of the ING Office Fund, has announced that IOF has acquired a 50% interest in a high quality, Grade A office building in Paris. The building, known as the Neuilly Victor Hugo Building ("NVH Building") is under construction and due for completion in April 2007. It has been acquired jointly with ING Insurance (Netherlands) for 155.4 million (A$259 million).
The property is strategically located in Neuilly-sur-Seine, which forms part of the Western Business District, between the Paris CBD and La Defense (the main office precinct of Paris). The main artery of the Western Business District is the Avenue Charles de Gaulle/Avenue de Champs Elysee, the blue ribbon, arterial axis of Paris.
Acquired below independent valuation, on a stabilised yield of 5%, the property was sourced, secured and will be managed by the ING Real Estate Investment Management team in Paris. The anchor tenant is Firmenich, one of the world's largest fragrance and flavour companies, with a product range incorporating perfumes, cosmetics, beverages and food. Firmenich will occupy 56% of the space on a 12 year firm lease, with the balance of the space to be leased.
CEO ING Office Fund, Tino Tanfara said, "Following on from the Fund's recent acquisition of 'Budejovicka Alej', in Prague, the acquisition of the NVH Building gives the Fund a 5% weighting to Paris, the largest office market in Continental Europe."
"The strong market dynamics of the district, coupled with the quality, location and amenities of the building will assist in achieving full occupancy in the short term and deliver attractive total returns to the Fund," said Mr Tanfara.
The acquisition will be fully funded by debt on completion of the building. The Fund's gearing will increase marginally from approximately 39% to 42% on completion of the building. Fixed interest rate and foreign exchange hedging has been put in place for five years to commence from April 2007.
Key benefits of the acquisitions include:
- Improved earnings and growth prospects
- Acquired below valuation
- New high quality building
- Strategic prime location
- Blue chip anchor tenant on firm 12 year lease
- Strong market dynamics
- Value add opportunity to further enhance returns
- Diversification to one of the world's premier office markets
- Weighting of 5% to the largest office market in Continental Europe
Property and market summary
The building is due to be completed by April 2007 and will consist of a total of 13,537 m² of lettable area over five levels with two under ground levels of parking, comprising 329 parking bays. The building has a unique 80 metre wide frontage and 4,500 m² of private garden at the rear, giving it a highly visible, prominent and prestigious image. Floor plates range from 2,000 to 2,300 m².
The building is strategically located in the Western Business District of Neuilly-sur-Seine, which draws tenants from both the CBD and La Defense due to its central location. The area has excellent accessibility by public (metro and bus) and private transport and is a dense commercial and high end residential district on the cusp of the center of Paris and the river Seine. The main arterial axis of Paris, the Avenue Charles de Gaulle/Avenue de Champs Elysee, links the area to the city, the major ring roads of Paris and the Airport. Many well known multinationals have established Parisian head offices in Neuilly-sur-Seine, including Ernst&Young, Otis, Sarah Lee, PWC, L'Oreal, and Clarins.
The current vacancy rate in Neuilly-sur-Seine is 2.8%, compared with the greater Paris metro (Ile de France) of 5.8%. The size of the Paris office market is approximately 16 million m² and the overall French office market approximately 26 million m².
France is the second largest country in the European Union with a population of over 60 million, behind Germany with 82 million.
With sound and continually improving office market fundamentals, the outlook for the Paris offi