AP7 has made its first investment in real estate, forming a joint venture with AMF and buying a third of its flagship Urban Escape central Stockholm multi-use development for SEK7.4bn (€655m).
AP7, the national pension fund which runs the default option in Sweden’s premium pension system, had its investment mandate expanded by the government at the beginning of this year, gaining approval to add alternative assets such as real estate, infrastructure and private equity to its existing listed equity and bonds asset mix.
It is now permitted to hold up to 20% of its currently SEK900bn of total assets in alternatives, and at the end of April Richard Gröttheim, its chief executive officer, gave details of the planned allocations it had to different unlisted asset classes.
The Urban Escape neighbourhood amounts to 135,000sqm and has a market value of SEK22bn, according to occupational pension fund AMF, which has been developing it via its property subsidiary AMF Fastigheter.
Gröttheim said: ”We are very pleased to be able to make our first investment in one of Stockholm’s most interesting properties.
“With this as a starting point, we will gradually expand our investments for many years to come, both in terms of value and number of countries,” he said, adding that AMF would be an “ideal partner” on that journey.
AP7 said the transaction – which is subject to approval from the Swedish Competition Authority – had been made with AP7 acquiring about 33% of the new joint venture company it had established with AMF to own the company.
AMF would remain as majority owner with AMF Fastigheter continuing to be responsible for the development and management of the city block, which includes the Gallerian shopping centre, the parties said.
Per Olofsson, acting head of asset management at AMF, said that with its long-term perspective as a pension fund, illiquid investments suited AP7 well and enabled better risk spreading.
“This requires collaborative partners with the same values and long-term approach as AP7’s, which we have found in AMF,” he said.
AMF described the deal with AP7 as strategically important because it created scope for future acquisitions and urban development projects.
AMF Fastigheter’s advisers in the transaction were Brick Advokat and Skeppsbron Skatt. While AP7 was advised by ABG Sundal Collier and Fredrik Wirdenius on the financial side, as well as AMABLAW and Setterwalls on legal matters.
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