Lehman Buys Paris Office Complex for EU2.11 Billion

Paris's Coeur Defense, Europe's largest office complex, was bought by Lehman Brothers Holdings Inc. and French partner Atemi for 2.11 billion euros ($2.8 billion).

Unibail (UL) Holding SA and real estate funds managed by Goldman Sachs Group Inc. (GS) sold the buildings, the companies said today in an e-mailed statement. The complex, in the French capital's financial district of La Defense, has total floor space of 182,000 square meters (1.96 million square feet).

Coeur Defense, designed by Jean-Paul Viguier and completed in 2001, consists of two 180-meter (590 feet) towers and three other buildings. Tenants include Societe Generale, ING Groep NV, Microsoft Corp. and Axa Investment Managers.

Rents of prime buildings in the La Defense district increased 18 percent in the 18 months to the end of 2006 and are set to rise for another two years, according to Jones Lang LaSalle Inc. At the same time, rent-free periods have fallen and prices have advanced as demand for additional space has coincided with a lack of new developments being completed.

``We have seen an enormous amount of investment in the Paris office market,'' said Stephen Miles, an investment director in the Paris office of Jones Lang. ``There has been pressure for good quality assets.''

Investment in French commercial real estate surged 67 percent to 24.1 billion euros last year, according to the Chicago-based realtor.

Unibail's Profit

Unibail, France's largest real estate investment trust, sold 51 percent of the complex to the Goldman-run Whitehall funds in July 2004 while retaining a 49 percent stake. At the time, the complex was valued at 1.35 billion euros. The Paris- based company, as a result of the transaction announced today, will make a book profit of about 350 million euros, according to JPMorgan Chase & Co. analyst Harm Meijer.

Unibail's shares fell 40 cents to 227.7 euros in Paris, giving the company a market value of 10.5 billion euros. The stock has advanced 41 percent in the past six months.

``A lot of the potential value creation in this company is already in the price,'' said Remi Antonini, an analyst at Exane BNP Paribas. Antonini today cut his rating on the shares to ``neutral'' from ``outperform.''

Lehman made the acquisition through Lehman Brothers Real Estate Partners. Lehman owns part of Atemi, a privately held company. The U.S. company's shares dropped $1.12, or 1.5 percent, to $72.38 at 11:48 a.m. in New York Stock Exchange composite trading.

To contact the reporters on this story: Simon Packard in London at packard@bloomberg.net; Peter Woodifield in Edinburgh at pwoodifield@bloomberg.net.

To contact the editor responsible for this story: Rob Urban at robprag@bloomberg.net.

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