As 42,000 real estate professionals descended on Munich this week, government bond yields across several key European markets were reaching their highest levels in decades.
With property valuations acutely sensitive to the cost of borrowing, such a backdrop is inauspicious. But that didn’t deter brokers from launching a series of major property sales at the Expo Real property conference.
For some investors, the decision to go ahead with planned disposals highlights how impatient they’ve become with the long wait for more opportune conditions. For others, it may be because they’ve simply run out of time.
“The world we live in is the world we live in and there is a sense that if you’re waiting for a significant change in the geopolitical environment, you’re going to be waiting for a very long time,” said Anthony Duggan, chair of Europe at Knight Frank LLP.
Among those preparing to offload investments is Blackstone Inc., the world’s largest real estate investor. Working with lender BNP Paribas SA, it’s appointed advisers to find a buyer for Kara and Tribeca, a pair of offices it developed in Paris’ Porte de la Chapelle district.
The buildings, close to the périphérique highway that encircles the French city, are still vacant roughly six years after completion. BNP Paribas financed the €180 million ($201 million) acquisition of the project with a €100 million loan that was subsequently extended for three years in 2023, a person familiar with the arrangement said.
Blackstone has since written off its equity in the project and the sale process is now being conducted with the agreement of the lenders, the person said, asking not to be identified as the details are private.
Representatives for Blackstone and BNP Paribas declined to comment.
Rising redemption requests are also prompting office owners to put properties — particularly those expected to attract plenty of bidders — on the market despite the rise in bond yields. Commerz Real Fund Management, part of Commerzbank AG, has appointed brokers at Newmark to sell an office in central Paris for roughly €500 million, according to people familiar with the matter.
The office, known as Etoile Saint Honoré, has been owned by Commerz Real’s open-ended HausInvest fund since 1998. Like many of Germany’s largest open ended real estate funds, HausInvest has seen investors head for the exits anticipating falling valuations. Clients pulled more than €600 million in the first seven months of the year and the manager anticipates full year redemptions will reach about €900 million.
A representative for Commerz Real declined to comment.
Other landlords are selling prime assets as they seek to reduce their relative indebtedness, a metric that’s expanded as property valuations have fallen. CPI Property Group SA’s Immofinanz unit has mandated brokers to sell the Spire skyscraper in Warsaw, Bloomberg reported. Immofinanz bought the property for about €386 million in 2019 and the building was valued at €365 million in CPI’s accounts in the first half of 2024.
The investor sold an office development in central London to an entity controlled by the billionaire Perrodo family earlier this year.
“CPIPG continues to actively sell assets, to fund investment and cut leverage,” Bloomberg Intelligence analyst Tolu Alamutu said. “Cutting leverage is especially important in the current rates environment.”
A Paris office building leased to Barclays Plc and owned by JPMorgan Chase & Co.’s asset management division is also set to go on sale for about €250 million, Bloomberg reported.
Still, while some investors have a clear need to sell during unsettled times, the assets continue to hold appeal. Rents for the best buildings are on the rise, providing the bull case for potential buyers, who are betting that growing income will compensate them for higher financing costs.
“European real estate is now fundamentally an income and income growth play,” said Michael Neal, Savills Investment Management global chief investment officer and interim chief executive officer. “Tighter spreads over government bonds mean the asset class must compensate investors for illiquidity and leverage risk.”