Gecina completes €150m Paris tower buy at 6% yield

French REIT Gecina has completed the acquisition of a 19,000 m2 building for redevelopment next to Gare de Lyon station in Paris' 12th arrondissement.

The asset was acquired from the Klésia Group and is expected to represent a total investment of around €150 mln at delivery, reflecting a net yield on cost of around 6%, with an unleveraged internal rate of return of over 9%.

The building - Tour Van Gogh – previously housed the Mornay group headquarters but is now vacant and will be fully redeveloped, with delivery scheduled for mid-2018. The area around Gare de Lyon is expected to benefit from the extension of line 14 of the Paris Metro, planned for 2019 to 2023. The district has a vacancy rate of less than 4%.

The seller was advised by Aktis Partners, Thibierge, De Pardieu Brocas Maffei and BNP Paribas Real Estate. Gecina was advised by Wargny Katz, Orfeo and CMS Bureau Francis Lefebvre.

Gecina has secured over €1.7 bn of new investments since the start of the year through the Sky 56, City 2, T1&B, PSA and Tour Van Gogh projects.

The company recently unveiled a new value-add strategy focused on the acquisition of iconic buildings in need of repositioning or redevelopment. Gecina’s pipeline represents over €2.8 bn of investments at June 30, 2015.

Earlier this year the French group bought two Paris assets from Canadian investor Ivanhoé Cambridge for €1.24 bn.

The transaction, which added 122,200 m2 of office space to Gecina’s portfolio, involved the 88,600 m2 T1 & B tower in the La Défense business district, which currently houses the global headquarters of Engie Group; and a 33,600 m2 office complex at 75 Avenue de la Grande Armée, currently housing the historic headquarters of PSA Group in Paris’s Central Business District.

These deals are in line with Gecina's ambitious growth strategy focused on offices aimed at consolidating the firm’s leading position for offices in Paris.

‘We are planning to focus on larger offices in the city centre of Paris and in mature office districts near the capital city, as well as on the Part Dieu district of Lyon,’ CEO Philippe Depoux recently told PropertyEU. 'We plan to be more selective than ever regarding locations,’ Depoux noted, added that the company will consider investments primarily in Paris’ city centre, La Défense, Boulogne, Issy-les-Moulineaux, Neuilly-sur-Seine, as well as the Part Dieu district in Lyon.