SWEDEN - Swedish pension provider AMF and German open fund manager DEKA Immobilien Investment have executed the largest single real estate deal in the city of Stockholm for more than two years.
City Cronan, a building encompassing 40,000 square metres of offices, shops, restaurants and homes in central Stockholm, is estimated to have been acquired by AMF for approximately €300m.
The deal will mean the €27bn AMF has an allocation to real estate of approximately 8%, although this is still below its long-term target range of 10-15%.
Mats Hederos, managing director of property at AMF, said it had been challenging to find appropriate assets in Sweden to build up the exposure, primarily because low interest rates had prompted banks and investors to hold on to properties.
"We thought that, when the downturn arrived, there should be a lot of opportunities in the market, but we were wrong," he said.
The City Cronan deal dwarfs the other 128 transactions in Stockholm over the past 12 months, which when combined have an average deal size of €24.4m, according to Real Capital Analytics.
The building has been on AMF's radar screen for some time.
"This has been the top priority for the last two years, at least," Hederos said.
The property is fully leased to Nordea Bank as the main tenant, as well as Akademibokhandeln and Sony.
City Cronan was identified as an attractive asset in its own right, but also serves a strategic purpose in that it is adjacent to AMF's Salénhuset shopping centre redevelopment and neighbouring Europe House, which AMF also owns.
Hederos said AMF was keen to establish a presence in this area of Stockholm, between the older eastern section of the city and the newer western part.
By owning and redeveloping several properties in the region, AMF is hoping to make the area increasingly attractive as a business location for both trade offices and retail.
Hederos said it was an unattractive location for tenants five years ago, but now had great potential.
"It will be a good location short term and long term," he said.
AMF owns more than 30 real estate assets in the Swedish cities of Stockholm and Gothenburg, mainly in the central regions, worth approximately €2bn.
The pension provider has no plans to invest in real estate outside Sweden.