Columbia U MSRED Paris 2011: Mardi

Today we visited the Jones Lang LaSalle offices. It was exciting because two of our group members, Genevieve Francois and Pallav Agrawal, worked there prior to coming to Columbia and because we gained a comprehensive overview of the French real estate market relative to that of Western Europe. Paris proved to be less volatile in historic downturns than London, Munich, and Madrid. This can be attributed to its central location, diversified economy, and lower debt-to-GDP ratios. However, for the last thirty years France has seen an unemployment rate of 8-10%, which is higher than average in Western Europe. Despite risks associated with the real estate market in France, when approached with experience, opportunistic (18-20%) returns can be made.

After lunch we took the metro to MGPA, a private equity real estate fund, who orchestrated the largest transaction in France in 2009. MGPA's office is located in a 19th century building from the Hausmannization Period (1852-1870). These buildings were designed for bourgeois homes on the wide avenues that were key to Hausmann's urban plan. Today, most have been re-developed as offices and are common in the Paris CBD. Although retrofitted, the building's grand staircase, central fireplace, and elaborate moldings made for a distinctively French business setting. However, the building systems, such as heating, ventilation, air conditioning, electrical, and IT, are outdated and it is difficult to upgrade them without extensive work to the original structure and facade. Due to French laws protecting historic buildings in Paris, it is difficult (with rare exceptions) to develop HQE assets (equivalent to LEED in the US) within the CBD. Therefore, many players are looking for opportunities outside the CBD. MGPA showed us an example of a transit-oriented-development of an HQE office deal they did in Saint Denis. The meeting illustrated how a fund can evolve as it gains more local expertise and what the responsibilities of an acquisition and asset management team are. After the meeting, we did an asset tour of Les Trois Quartiers,the largest transaction of 2009, which is located in prime location adjacent to the Church of the Madeleine.