Two huge rival real estate investment companies have been battling it out for the takeover of the Paris commercial real estate property company, Foncière de Paris.
Eurosic and Gecina have been head to head for months in a complex bid for Foncière de Paris.
Foncière de Paris is a property company created in 1985. It owns a €2.6 billion property portfolio, made up of prime Paris commercial real estate in the capital and the Western Crescent.
Paris commercial real estate is in high demand. The contest for Foncière de Paris was driven by the current trend of hard investment into the Paris commercial property market. Investors pushed investment volumes over €20 billion last year. That’s the highest figure seen since before the 2008 financial crisis.
Coveted Paris commercial real estate of Foncière de Paris
Both French companies in the running said the acquisition of Foncière de Paris would strengthen their leadership in the Paris prime office market.
Their involvement in the public offering however attracted much controversy. It also involved clearance from the French competition authority, the Autorité des Marchés Financiers (AMF).
Gecina owns, manages and develops property holdings worth €11.7 billion, with 97% located in the Paris region.
Eurosic specializes in the acquisition, operating and management of property assets. Most of its portfolio is also made up of commercial office assets in the Paris region.
Bidding War for Foncière de Paris
Eurosic offered to buy Foncière de Paris on March 4 for €136 euros a share in cash, valuing it at about €1.4 billion. Gecina counter-offered €150 euros per share.
But Foncière de Paris’ biggest shareholder surprised industry-watchers when it backed the lower rival bid for its commercial Paris real estate.
French insurance company Covea, which holds about 30% of Foncière deParis, said it preferred Eurosic’s bid despite the 10% higher cash offer from Gecina.
Covea, however, also holds a near-22% stake in Eurosic.
Not Fair Play Says Gecina
So, on July 29th, Gecina asked the AMF to withdraw the compliance statement granted on April 26th to Eurosic’s offer.
It wanted the AMF to rule that share tender agreements, involving certain shareholders of Foncière de Paris, were unfair. They deprived Foncière de Paris’ other shareholders of choice, it said.
But on August 12th, the AMF turned down Gecina’s request.
So, on August 22nd, Gecina filed an appeal against the decision with the Court of Appeal.
It argued that its offer for Foncière de Paris’ collection of Paris commercial real estate was more attractive and that the principles of equal treatment and fair competition had not been followed.
Powerful Potential of Paris Commercial Real Estate
The conclusion of the story came at the end of September. The management board of Foncière de Paris said that despite Gecina’s higher share offer, they still preferred the Eurosic bid. They said they’d been convinced by Eurosic’s broader overall real estate development strategy. The result? Eurosic now holds almost 77% of the capital of Foncière de Paris.
This has been a long saga that has gripped Paris for months. Gecina and Eurosic’s enthusiasm for Foncière de Paris’ prime office assets underlines just how valuable and desirable Paris commercial real estate is.
Investors are buying French property at a rate not seen since before the financial crisis. Quantitative easing is partly behind this growing demand for yield. But the strong performance of Paris commercial real estate has been the biggest factor.
If you’d like to find out more about investing in Paris real estate, you can contact 56Paris Real Estate here.