The First (AP1) and Second Swedish National Pension Fund (AP2) together with TIAA-CREF, a leading financial services provider, have agreed to combine forces in a new joint venture to create a leading, pan-European office investment platform committed to building €4bn+ office portfolio. TH Real Estate, have established the platform for the joint venture and will manage the vehicle on the investors’ behalf, providing investment and asset management services.
The joint venture will be seeded with existing properties owned by the TIAA General Account and AP1 and AP2’s properties in Cityhold Property AB, creating an initial platform valued at €2.2bn comprised of 258,000 sq m of core office space across the UK, France & Germany. With 15 assets (9 contributed from the TIAA General Account and 6 from AP1 & AP2), the current portfolio includes landmark assets such as 12-14 New Fetter Lane and One Kingdom Street in London, Tour Areva in Paris, and Atlantic Haus in Hamburg.
The venture will commence an active investment programme with new capital from the TIAA General Account, AP1 and AP2 targeting an additional c. €2bn of investment over the next 3 years. It will primarily target ‘core’ investments in Tier 1 cities such as London, Paris, Munich, Hamburg, Frankfurt and Berlin. Additionally, the investment programme will invest in ‘value-add’ opportunities such as leasing, renovation and development opportunities in Tier 1 cites, or stabilised core investments within Tier 2 cities that include Madrid and Milan, among other cities.
The newly formed investment vehicle, to be named ‘Cityhold Office Partnership’, will target a loan-to-value ratio of 50%. TIAA-CREF will hold a 50% interest in the vehicle and each AP fund will hold 25%. The joint venture extends the long-term investing partnership between TIAA-CREF and AP2, which has been co-investing with TIAA-CREF since 2012 in various real asset strategies including TIAA-CREF’s timberland strategy and investing in farmland in the United States, Australia and Brazil.
The transaction is expected to close in September.
Johan Magnusson, CEO of AP1, said: “We are excited to merge the existing Cityhold properties with those owned by TIAA-CREF, while also making a commitment to make further investments in the coming years. The greater capital base provides the vehicle with better opportunities to make good long-term investments in commercial properties in a number of selected large European cities.”
Eva Halvarsson, CEO AP2 said: “In 2011, in partnership with AP1, we established Cityhold Property AB with a view to investing in real estate in the major European cities. Now that Cityhold’s property portfolio is being merged with TIAA-CREF’s European portfolio of commercial real estate, we have successfully enhanced and diversified the portfolio of European real estate, in line with the strategy originally outlined for the company. Moreover, with TH Real Estate, we gain an operating partner of considerable expertise, especially with regard to local markets.”
Phil McAndrews, Senior Managing Director and Chief Investment Officer of TIAA-CREF Global Real Estate said: “Our investing partnership with AP1 and AP2, like-minded investors who share our long-term investing horizon and focus on high quality assets, enables us to further diversify TIAA’s existing European office portfolio across asset, tenant and market exposures while establishing a broader platform to expand our European investments.”
Johan Åström, Head of Investment, Sweden, TH Real Estate, said: “We are delighted to have been entrusted to establish this European platform for TIAA-CREF’s and the First and Second AP Fund’s co-ownership of commercial real estate. The platform brings together market-leading investment competence and local property expertise in a joint view on value creation. We look forward to managing, supporting and developing the platform in the years to come.”
Jasper Gilbey, Director at TH Real Estate and lead adviser of the investment vehicle, said: “Our strategy will be to target core office opportunities across Europe with a focus on low risk, liquid markets such as London, Paris, Hamburg, Munich, Berlin and Frankfurt. While the venture will focus on core opportunities, it will also consider value-add opportunities within these core Tier 1 markets, as well as stabilised opportunities in other key European cities, as a means of boosting performance and generating attractive risk adjusted returns. In addition to liquidity and diversity, the target markets have been selected on the basis of their long run structural trends, such as demographics, technology and sustainability, which we expect to drive strong growth prospects and result in enhanced investment performance in the long-term”
For further details contact:
AP1 Ossian Ekdahl, Head of Communications, +46 8-566 20 209, or +46 709-681 209 Oskar Backman, Portfolio manager, +46 709-68 12 53
AP2 Ulrika Danielson, Head of Communications, +46 31-704 29 29, or +46 709-50 16 13 Helena Olin, Head of Real Assets, +46 31-704 29 00
TH Real Estate Helena Winje, Press Contact, +46 8-58 80 95 00, or +46 70-204 94 85
About TIAA-CREF: TIAA-CREF (www.tiaa-cref.org) is a national financial services organization with $869 billion in total assets under management (as of 6/30/2015) and is the leading provider of retirement services in the academic, research, medical and cultural fields
About TIAA-CREF Asset Management: TIAA-CREF Asset Management (https://www.tiaa-cref.org/public/assetmanagement) is a global investment manager, registered investment advisor and wholly-owned subsidiary of TIAA-CREF that provides investment advice and portfolio management services to individual investors, intermediaries and institutional clients, including the TIAA General Account. Its strategies cover a wide array of asset classes, including equities, fixed income, real estate and alternative investments.
About AP1: Första AP-fonden (AP1) is one of five AP funds in the Swedish national income pension system. The capital reserves in the AP funds ensure that pension benefits can be paid even when disbursements from the pension system exceed contributions into it. Första AP-fonden has assets under management of approximately SEK 300 billion in a global portfolio comprising equities, fixed income securities, real estate, private equity funds and hedge funds. Första AP-fonden invests to achieve high and long-term sustainable return. More information about Första AP-fonden at www.ap1.se
About AP2: The Second AP Fund (AP2) is one of northern Europe’s largest pension funds, managing assets totaling more than SEK 300 billion of Sweden’s national pension assets, which are invested worldwide. The Fund is tasked with generating a solid return on investment, while implementing a consistent policy of responsible and sustainable investment. www.ap2.se
About TH Real Estate: TH Real Estate is an established investment management company, specialising in real estate equity and debt investment worldwide. As one of the largest real estate managers in the world, TH Real Estate has the scale, capital resources and knowledge to provide creative and effective real estate investment solutions for clients. With a focus on the retail, office, logistics, debt and multifamily residential sectors, TH Real Estate emphasises sustainable practices to protect assets and maximise their value.
The company is owned by TIAA-CREF, a US financial services and Fortune 100 company, with €791bn assets under management*. Launched in April 2014, TH Real Estate has a dedicated global presence with offices across America, Asia and Europe, representing c.€25.6bn* of real estate assets across c.50 funds and mandates. Together with TIAA-CREF’s US real estate assets, the global real estate platform of €78bn* represents one of the largest real estate investment management enterprises in the world.
Its products are managed by specialist teams, which apply their own experience to the management and style of their portfolios. Each team is supported by an experienced senior management team and integrated investment platform, including finance, debt and currency management, performance analytics, client service, fund and transaction structuring, development, sustainability and research. www.threalestate.com
* Figures as at 30 June 2015.