Pramerica sees Champs-Elysées as risk-return bargain

Pramerica Real Estate Investors tells PropertyEU that its €135 mln acquisition of 118 Avenue des Champs-Elysées is part of a structural focus on the Paris market.

The asset was acquired from listed Italian property company Risanamento, which is cashing in €24 mln from the sale, while reducing its debt by €87 mln in total.

According to a Risanamento spokesperson, the Milan-based company sold the landmark asset in the French capital after receiving an expression of interest from Pramerica. 'This property was not sold through a sale process. Risanamento received an unsolicited bid and decided to dispose of the property because the offered value was estimated to be adequate,' the spokeswoman said.

The deal price of €135 mln is nearly 30% higher than the property's latest appraised value at year-end 2011, she added. The transaction generates a capital gain of €13 mln for Risanamento compared to the price the company paid for the asset in 2006.

PARIS FOCUS
Pramerica said the deal reflects its commitment to expanding its client offering in Europe with a structural long-term focus on the Paris market. The company, the European arm of US group Prudential Financial, currently has €1 bn of assets under management in France.

'We believe that prime retail assets with reversionary potential driven by continuing demand strength for a few key destinations, such as Avenue des Champs-Elysees in Paris, offer one of the best risk-return profiles in Europe at the moment,' said Raimondo Amabile, Managing Director co-head of Europe for Pramerica.

118 Avenue des Champs-Elysées is a multi-let office and retail freehold building located on the most emblematic avenue in Paris. It is an art-deco stone property that was refurbished in 2009 and provides 5,000 m2 of Grade A office and retail space fully let to a number of blue chip tenants, including Mercedes Benz, Crédit Mutuel and Helaba.

DEBT RELIEF
Risanamento bought the seven-storey property at end 2006 for €92 mln, funding the deal with a €60 mln loan from Eurohypo. The deal reflected a record low yield of 3.9% at the time of the acquisition, and a loan to value of around 70%.

The Italian property company owns a total of 82,800 m2 of offices in France, distributed across 10 buildings which represent around 50% of its portfolio.

The heavily indebted developer has been seeking to sell several assets in the past months in an effort to repay its debt load. In addition to the Paris property, the company is in negotiations to divest the Sky office complex under development in Milan to California-based private equity fund Global Asset Capital. The project, due to house the headquarters of pay-Tv operator Sky, involves debt of around €194 mln and has yet to be completed.

Similarly, Risanamento is in negotiations to divest the Milano Santa Giulia development to Hines Italia Sgr. In the first nine months of the year, the company posted net loss of €56 mln, versus €59 mln a year before.