European landlords reach out to Asian real estate investors

As Asian institutions have become increasingly interested in continental Europe's real estate sector on the back of the cheaper euro and the central bank's money printing programme known as quantitative easing, a growing number of European landlords are actively reaching out to Chinese and other Asian investors.

Asian institutional funds are generally under-allocated to overseas real estate assets partly because of stringent regulations. However, relaxation in China, South Korea and other countries will lead to a rapid surge in their real estate investment in the next few years.

Beyond the richly priced core in New York and London, European gateway cities including Paris look compelling on a value basis, taking into account a 20 per cent currency discount over the past year to Chinese buyers and quantitative easing, said Raphael Treguier, the chief executive of listed real estate investment trust Cegereal, which owns three office sites of six buildings worth US$1.1 billion in Paris.

"My trip to Asia is to help me understand the Chinese investors and their perspectives on the Paris market, as we have seen growing interest from Asian investors in Europe and from international investors in Paris over the past year," Treguier told the South China Morning Post.

His Asian trip came amid news that Goldman Sachs and AltaFund have agreed to buy two office towers in Paris' La Defense financial district and plan to refurbish the buildings, which were developed as IBM Europe's headquarters 30 years ago.

Cegereal has just transformed its Europlaza office tower in La Defense, swapping the views on a cement and glass environment for trees and green views.

"Our focus so far has been on adding value to existing assets but as the market starts to recover, we are contemplating expanding our portfolio as well," Treguier said.

He added that Paris was Europe's biggest office market with 56 million sq metres, while London's office market is only 21 million sq metres.

Real estate investment in Paris rose 45 per cent last year to US$24.5 billion, almost half of which was driven by the return of international players including funds from the US, while the amount in London fell 2 per cent to US$42.9 billion, according to data from Real Capital Analytics.