02.04.2020
LEADING CITIES INVEST purchases PIXEL office property near Paris
- Fully let office property with an “exceptional” HQE certification
- Performance of 3.9 % p.a.
- LEADING CITIES INVEST with below-average risk profile in the Corona crisis
The LEADING CITIES INVEST purchased the fully let office property PIXEL in the western metropolitan area of Paris. The property with an “exceptional” HQE In-Use certification is situated in the commune of Nanterre, which is part of the Paris Ouest La Défense district around eight kilometers outside the western edge of Paris. Thanks to excellent local public transport connections, La Défense, the center of Paris and the popular residential areas to the west of the French capital, are within a few minutes’ reach. The main tenant of the PIXEL building is a subsidiary to the BNP Paribas Group, BNP Paribas Leasing Solutions, one of Europe’s leading providers of asset finance, leasing and rental solutions for professional equipment. It has been agreed to keep the sales price of the property confidential.
In the current Corona crisis, LEADING CITIES INVEST has a comparatively below-average risk profile, primarily due to its tenant mix and its well-diversified property portfolio. In addition, investors in the KanAm Grund Group’s open-end real estate fund are protected against similar distortions as after the Lehman crisis, since LEADING CITIES INVEST is a „new generation” real estate fund in which the shock-resistant mechanisms of the new investor protection legislation apply to all investors (a twelve-month notice period and a twenty-four month minimum holding period).
Over recent years, Nanterre has developed into a popular location for a variety of industries from finance, energy and retail to pharmaceutical, automotive and human resources. 13 of the 15 major companies have their company headquarters here. The PIXEL property provides 16,447 square meters of office space, spread across 6 levels including the ground floor. 222 of the 240 parking spaces are located in two underground car parking levels with a further 18 spaces outside. The building wraps around two accessible courtyards, which allow natural daylight to flood through the office space.
The property has an HQE In-Use sustainability certification. This is a French assessment and certification system developed to support property managers in reducing and improving the environmental impact of buildings. HQE certification is currently mainly available in France. The property has an HQE In-Use sustainability certification. This is a French assessment and certification system developed to support property managers in reducing and improving the environmental impact of buildings. HQE certification is currently mainly available in France. In future ASSOHQE (the association for HQE certification) is aiming to extend the standard to an international level.
Aside from BNP Paribas Leasing Solutions, around 14 % of the Paris Ouest La Défense area is let to a public institution facilitating inter-municipal cooperation. Based on an initiative by the city of Nanterre, Paris Ouest lets space to start-ups and new enterprises.
Last year the management of the LEADING CITIES INVEST managed to open up new markets to the fund, namely those of Finland, Poland, Switzerland, Spain and Ireland. In 2019, the property portfolio thus grew to 30 individual properties in 22 locations across 9 countries. This open-end real estate fund has now got a presence in selected future-oriented locations throughout Europe, from Helsinki in Finland to Barcelona in Spain, from Dublin in Ireland to Warsaw in Poland. Having transformed its energy supply to ensure sustainability, the LEADING CITIES INVEST was able to reduce CO2 emissions by 1,821 tonnes in 2019 alone. The KanAm Grund Group’s open-end real estate fund was able to further improve its performance to 3.9 % p.a. by February 2020.
Corona and Real Estate
The corona pandemic is keeping the whole world in suspense. Efforts to slow them down and curtail them have brought social and economic life to a standstill in large parts of Germany and most other countries. Hotels and retail are particularly affected, and to a certain extent also residential areas.
LEADING CITIES INVEST is invested far below average in these industries compared to the overall industry. For example, while the share of hotel real estate in open-end retail property funds has increased by 4 percentage points to 9 percentage points in the past three years, LEADING CITIES INVEST in Brussels sold its only hotel and the German headquarters of a hotel provider in Munich and is now mainly invested in the office real estate.
In current stress tests and risk assessments, the KanAm Grund Group is currently assuming that the corona pandemic will have a significant impact on the economic cycle. As a result, there is a high likelihood of negative growth and liquidity bottlenecks and even insolvency in particularly affected industries.
The LEADING CITIES INVEST portfolio, which currently has around 90 tenants, is a diversified tenant portfolio. The portfolio is also characterized by multi-tenant properties. The good creditworthiness of the main tenants contributes to further risk reduction. While 34 % of all open-end real estate funds (as of 31 December 2019) were invested in the risk sectors retail (26 %) and hotel (8 %) sectors, current risk analyzes for LEADING CITIES INVEST with its diversified portfolio of tenants with good credit ratings show after the purchase of PIXEL that only 10.6 % of the tenant portfolio at a higher risk.
The risk of rent losses or tenant insolvencies cannot be excluded on the basis of the risk analysis. However, the creditworthiness of the main tenants and the majority of the tenants directly affected by the coronavirus pandemic can still be rated as good.