The Four Food Groups – November 2007

OFFICE
Seller’s regret in Paris
Hindsight is 20/20, especially in cases where the government sells an asset and then buys it back at a higher price. A report that appeared last month in French daily newspaper Le Figaro claimed that a 2003 sale of L’Imprimerie Nationale, the national printing office building, in central Paris to The Carlyle Group was valued about €35 million lower than it should have been. The report cited a confidential study conducted by the government’s inspector general. Carlyle purchased the office building, based in the 15th arrondissement, for €85 million and recently agreed to sell it to France’s foreign ministry for €377 million, according to the report. It did not specify why the inspector general concluded that the 2003 valuation was too low.

The controversy comes amid a boom in demand for Paris office property. According to Cushman & Wakefield, the first half of 2007 saw investment of €15 billion in the Paris office market, against €19 billion for the whole of 2006. The participation of foreign investors has surged, with only 37 percent of investment coming from French buyers. Last year, French capital represented the majority of investment in Paris office property. Prime office yields in Paris have fallen to a historic low of 3.8 percent and office rents are up nearly 14 percent from a year ago.

There is the expectation among some market observers that the recent election of Nicolas Sarkozy as France’s president will bring much-needed reforms, unleashing greater potential for one of the world’s financial centers. Not everyone anticipated such a rosy outlook for Paris in 2003, including, possibly, its own government.

RESIDENTIAL
Going, going, gone
The Washington, DC metro’s first condo auction saw dramatically reduced prices, a not-to-be-missed opportunity for area homebuyers. Parkside Alexandria partnered with Accelerated Marketing Partners of Boston to auction off its remaining 30 condos at the 378-unit Parkside at Alexandria complex. The units are being sold off at a bargain: Two-bedroom homes that recently sold for $340,000 will be offered for a minimum of $225,000. Twenty two-bedroom homes with over 1,000 square feet of space and ten three-bedroom homes with 1,347 square feet were sold. The minimum selling prices for the Parkside condos are approximately $204 per square foot for the three-bedroom homes and $212 per square foot for the two-bedroom units, less than half the current average persquare-foot price of new condos in the area. The auction is yet another sign of a flagging housing market. Buyers, however, walked away with a steal.

INDUSTRAIL
Zen storage
ProLogis is continuing its courtship of Japan. The Denver-based logistics developer is planning to double its investments in Japan to 1.1 trillion yen ($9.5 billion; €6.6 billion) in the next three years and is also planning to double its investment in the rest of Asia to $2.5 billion this year, Jeffrey Schwartz, ProLogis chief executive, told Bloomberg. The company is also looking to grow its staff in Asia up to 25 percent in the next year. ProLogis currently has two funds targeting Japan worth more than ¥320 billion, the first which it launched in 2002. The follow-on fund launched three years later with more than $600 million in capital commitments. Both funds are partnerships with GIC Real Estate, the government of Singapore’s real estate investment arm. ProLogis may set up a third Japan-focused property fund with GIC Real Estate next year, according to Schwartz.

RETAIL
Made in Romania
Fashion gurus may be flocking to a new shopping mecca in Romania. ING Real Estate acquired the Felicia Shopping Centre in Iasi—its first property in the country—through the purchase of Belgian company Felicia Invest in a €40 million ($57 million) deal. The property will be added to the ING Property Fund Central and Eastern Europe (ING PFCEE), which has a target size of €1 billion. The shopping center, comprised of approximately 26,330 square meters of rentable space, includes tenants such as Carrefour and Marks & Spencer department stores. “Felicia Shopping Centre is a promising new retail asset in one of Romania’s largest cities and forms a solid basis for our future expansion in the fast-growing Romanian market,” Martin Sabelko, managing director at ING’s Central and Eastern Europe team, said in a statement. The firm opened an office in Bucharest earlier this year.