ATP Real Estate has struck the first deal for its new direct residential strategy, which will see it fund the construction of 72 assisted-living homes for elderly people on Denmark’s north-eastern coast.
The real estate arm of Denmark’s DKK753bn (€101bn) statutory pension fund ATP has been laying the groundwork for the new strategy in recent years.
The project, which has a budget of DK150m, is intended as a pilot for a model to be repeated in other different locations in the country.
Michael Nielsen, chief executive of ATP Real Estate, told IPE: “A few years ago we created a direct strategy for residential property in Denmark — which could be student housing, retirement homes or residential property for Danish citizens and this is our first investment under this strategy.”
Last year, ATP Real Estate decided to move into direct residential investments, having already started to invest in hotels for the first time, as part of efforts to diversify away from office and retail.
Nielsen said the residential investment would be supported by demographic changes in Denmark. “We expect a growing demand for this kind of accommodation in the future, and municipalities are facing the question of how they meet this demand,” he said.
ATP Real Estate will be the owner of the properties but will have not involvement in the operation of the facilities, Nielsen said.
The project will be run by the existing ATP subsidiary Seniorbolig Danmark, which will own the homes, and operations will be carried out by residential care company OK Fund which has entered a 20-year contract.
“OK Fund will be our tenant, and they will deal with the municipality as well as the individual people who want to live in the homes,” he said.
“We have been chasing a number of residential opportunities here in Denmark, but the price levels we have seen in the Danish market over the past two or three years have been a challenge for us, because we want see the long-term perspective.
“This first investment we have now done could be a pilot project for other similar projects in other locations in Denmark, because we see a growing demand for this in Denmark, but it’s really up to the local authorities.”
Asked whether ATP would use the same company as the operator of future senior housing projects, Nielsen said it could be an option, while pointing to the existence of similar operators in the Danish market.
“What is important is we have a very professional tenant, because it is important this operation runs smoothly,” he said. “We have had a lot of focus on finding the right tenant.”
Nielsen said ATP was aware of reputational risk associated with managing assets like care homes. “That’s why I emphasise that we do a lot of due diligence, checking the operator and making sure we really find the best company in the country with a good, long reputation,” he said.
Nielsen declined to give specific expected returns for the investment. “What I can say is that this investment really fits our return expectations for general real estate investments, and we are satisfied with this,” he said.
ATP had around DKK35bn in real estate at the end of 2016, equating to just over a third of its return-seeking DKK100bn investment portfolio.