South Korea’s Vestas Investment Management Co. Ltd. was selected as a preferred buyer of an office building of L’Oréal near Paris late last month, and is in the final stages of raising 250 billion won ($208 million) from domestic insurance firms to fund the 600 billion won ($500 million) acquisition.
Hyundai Marine & Fire Insurance Co. Ltd. will put up 100 billion won to be an anchor investor of the deal, according to investment banking sources on Jan. 4. Other unidentified South Korean insurance companies are waiting for approval from their internal investment committees to make equity investments in the building, So Ouest Plaza.
Further, Vestas Investment will borrow 350 billion won from foreign banks to buy the property from a REITs company. BNP Paribas Real Estate will set up a special purpose company and run a real estate fund for the investment.
The Korean investment firm plans to complete the transaction by the end of this month and expects to provide around 8% annual returns to investors for five years. The target return is higher than the 5~6% offered by recent U.S. real estate investments made by Korean institutions because the European investment reflects a currency hedging premium.
As the euro has weakened against the dollar in the wake of the Brexit vote and the U.S. presidential election, Korean investors are keen to make equity investments in real estate in Germany, France and other major European countries amid expectations of currency hedging premiums. By comparison, Korean institutional investors are switching into debt tranches of U.S. property deals on the prospect of higher U.S. interest rates.
So Ouest Plaza, covering 45,000 square meters, is a mixed-use building in Levallois-Perret, a northwestern suburb of Paris. Its office space is occupied by the French cosmetics firm.
L’Oréal signed a 10-year lease agreement for the building in December 2014. It is one of five L’Oréal office buildings in the vicinity of the company’s global headquarters in Clichy. Jean–Paul Agon, chairman and chief executive officer of the French company has his office on the top floor of the building which was renovated last year and has a cinema in lower floors.
By Daehun Kim
<Edited by Yeonhee Kim>