Partners Group enters France with €170m office deal

The Swiss firm is understood to be targeting a ‘mid-teens return.’   

Partners Group has completed its first direct real estate deal in France following the acquisition of a Paris office tower in the city’s La Défense financial district for €170 million.

The Zug, Switzerland-based private markets investment manager, told PERE that it bought the CB16 Tower using capital from several funds and mandates it manages on behalf of clients.

The 28-story property, which has 300,000 square feet of prime office space, was built in 1971 and underwent renovation in 2003.

Partners Group, traditionally a value-add operator, is understood to be targeting a core-plus return in the “mid-teens” region, according to market sources, and will improve the asset’s tenant mix through further renovation.

The Swiss firm also said it was teaming up with French operator Aquila Asset Management, which will manage the property.

Mike Bryant, managing director, co-head private real estate, Partners Group, said the firm had targeted France, and in particular La Défense, for the first time because Paris’s financial district had seen a recent surge in interest.

“La Défense is experiencing a steady recovery in demand for office space compared to previous years and the acquisition of CB16 Tower is a great way to gain exposure to the area at a good point in the cycle,” said Bryant.

“Given the visibility on income this investment brings and the quality of the building, the tower fits well with Partners Group’s relative value focus on acquiring office property below replacement cost in decentralized locations in Tier 1 cities, where pricing does not yet reflect attractive fundamentals.”

Investment volumes in the Paris office market dipped in H1 2017, compared with the cyclical peak of H2 2016, according to JLL.

However, the property services firm also suggested the city’s office sector was tipped to bounce back in the second half of 2017, buoyed by a decrease in Q2 vacancy rates.

CB16 Tower is the second major European office asset acquired by Partners Group in as many months. In June, the firm announcement that it was to construct a 14-story property in the City of London, in partnership with London property developer Exemplar.

The building, at 80 Fenchurch Street, will comprise around 240,000 square feet of Grade A office accommodation and 12,250 square feet of retail space. Construction began recently and is scheduled to be completed in 2019. The firm said it would be the new building’s first occupier, relocating its UK office from the Heron Tower.

Partners Group has around €57 billion of assets under management in private equity, private real estate, private infrastructure and private debt.