Amid industry debate about the post-pandemic future of the office sector, lender Allianz Real Estate has financed a French development to be largely made from wood, which its head of European debt said is a prime example of a “future-proofed” asset.
The real estate investment management arm of the German insurer Allianz has granted a €200 million loan for the construction of an office complex in the Paris region to a consortium of investors that includes Icawood, an investment fund co-launched by Luxembourg-based property fund manager Icamap and Canadian real estate company Ivanhoé Cambridge, specialising in low-carbon-emission office developments, and property manager BNP Paribas Real Estate.
The loan, secured against the Arboretum campus, will fund 46.3 percent of the overall total financing of €432 million, with the remainder provided by a group of unidentified lenders. The 126,000-square-meter property will feature seven buildings spread over nine hectares and is set for delivery in 2022.
Allianz said five of the seven buildings will be primarily developed from cross-laminated timber and will meet environmental standards including the Building Research Establishment Environmental Assessment Method certification and the Hauté Qualite Environmentale, a certificate available to construction projects in France.
Roland Fuchs, head of European real estate finance for Allianz Real Estate, told Real Estate Capital that, while there is some uncertainty around the sector, offices will not cease to exist as a working concept and an investable asset class in a post-pandemic world. “We therefore believe in office schemes with future-proof characteristics in terms of environmental, social and governance requirements, digitalisation, flexibility of use, connectivity and, last but not least, features which can improve the health and well-being of the building’s users. This project perfectly addresses all of these aspects.”
All parties involved in the project managed to carry out their due diligence processes during the lockdown period, said Fuchs. “The way this was carried out, as a mix of physical and virtual or remote working, perfectly illustrates how we anticipate we will be increasingly working going forward.”
With regards to the challenges of backing development schemes during the current market uncertainty, including the increased risk of projects being delayed due to covid-19-related disruptions, Fuchs said Allianz had considered and embedded in the deal’s financial terms all “relevant risk factors typically applicable for a development loan including, but not limited to, a project delay”.
Despite the big questions raised about the future of office demand amid changing working patterns, Fuchs said that debt finance for this type of asset with a focus on environmental best-practice will continue to be available. “As evidenced through this transaction, prime office schemes adapted to the future still find financing, both investment and construction loans.”
Fuchs was also confident about the future of the Paris office market. “Paris will remain the largest and most diversified office market in continental Europe,” he said. “It has always been the front-runner and European leader in new and innovative office schemes and this project is further proof that Paris continues to lead the way into the future.”