Lone Star has appointed a trio of banks and brokers to advise on options for the Coeur Defense building in Paris, EuroProperty can reveal, in a process which is likely to lead to the biggest office sale since the financial crisis.
This story was first published in the March 2017 edition of EuroProperty, which is part of the PropertyEU Group
The US private equity firm has appointed Rothschild, Morgan Stanley and JLL to advise on the 177,040 m2 property, which is the biggest office building in Europe.
It is understood a refinancing of the building's debt is being undertaken first, with options for a sale assessed after this has been completed. While no sales process is formally ongoing, the expectation is that the building will be sold imminently, possibly once the French election has concluded in May.
The building could be sold for as much as €1.8 bn, which would make it the largest single asset sold in Europe this cycle. The sale would be seen as a litmus test for the sale of iconic but complex offices in Paris.
The building is around 20% vacant, according to an interview with its asset manager last year. Lone Star has improved the income since it bought it in 2014.
The previous largest tenant, AXA, which occupied 26,000 m2, moved out when its lease expired in 2016, but Lone Star re-leased the space to HSBC, which now occupies 46,000 m2. HSBC pays a lower rent than AXA, but the weighted average lease length of the building has improved significantly under Lone Star's ownership.
Lone Star bought the building in 2014 for €1.3 bn in a clever and complex deal when it bought into the debt secured against it and the equity of the bankrupt holding company that owned it. The building was in bankruptcy after its previous owner, the estate of Lehman Brothers, failed to repay €1.6 bn of debt secured against the asset when it matured in 2009.
The building was set to be openly marketed in 2014, but Lone Star pre-empted this process and took control.
Lone Star funded its purchase with a €935 mln loan from Bank of America Merrill Lynch, split into an €805 mln senior tranche at an interest rate margin of around 200 basis points, and a €130 mln junior tranche at a rate of around 675 bps. It securitised about €400m of the senior tranche. The loan-to-value ratio on that debt was 72%. It is thought that BoAML is likely to be involved in the new financing.
All parties declined to comment.
