Testina, a Swiss investment foundation managed by real estate asset manager Pensimo Management, has launched a new global value-add/opportunistic real estate strategy.

The new product is structured as a closed-ended Swiss investment group, exclusively investable by Swiss pension funds, with Swiss Post and the City of Zurich Pension Fund as cornerstone investors. Both pension funds have been longstanding investors in Testina for global real estate investments, in both the core and non-core segments.

Jürg Tobler, CIO of the City of Zurich Pension Fund said: “The strategy has been tailored for Swiss pension funds and provides a complementary exposure to the pension fund’s existing core real estate allocation by exploiting value-add opportunities. This investment allows us to enhance returns and unlock an attractive return profile while reducing the correlation to other asset classes.”

Nicolai Donat, portfolio manager at the pension fund of Swiss Post added: “This new strategy allows us to gain exposure to global real estate opportunities in the non-core space through “best-in-class” local managers. At the same time, the chosen structure and setup has been optimised to account for the specific requirements of Swiss pension funds.”

The vehicle targets a broad spectrum of value-add and opportunistic strategies, including refurbishments, lease-ups, and the repositioning of real estate assets, to increase value and enhance returns.

Paola Prioni, managing director at Testina, said: “The goal of the strategy is to build up a globally diversified portfolio with a focus on major metropolitan markets and prime locations.

“The vehicle will invest across real estate sectors while emphasising growth segments that benefit from demographic and structural trends such as logistics, residential and alternative use types including student, senior housing, life science, self-storage and data centres.”

Building real estate exposure

The investment group intends to build its real estate exposure indirectly through private equity real estate structures such as limited partnerships or non-listed funds. The strategy focuses on both primary and secondary real estate investments across diversified large-cap, mid-cap, small-cap and niche or sector-focused strategies.

Prioni added: “In the secondary space, the strategy will execute both, traditional LP-led transactions, but also GP-led secondaries. In the traditional secondary space opportunities at significant discounts to fair market values are targeted through the acquisition of investments from limited partners with liquidity needs who are motivated sellers.”

She said that for the GP-led secondary exposure, the strategy “addresses the liquidity needs of real estate managers, also through recapitalisations”.

The investment group also has “the flexibility to execute investments in real estate debt on a tactical basis to optimise the risk/return characteristics of the mandate”, Prioni said.

“Given regulatory constraints, traditional lenders are reducing their credit exposure, which creates high-yield opportunities. The strategy also aims to benefit from market dislocation and structural trends in the real estate market,” she added.

To date, the investment group has closed on three value-add investments as well as a secondary strategy, which predominantly executes GP-led secondary transactions.

Philip Signer, senior investment manager at Testina, said: “We believe that the current market environment offers an ideal timing to build up a global value-add strategy. While the adjusted price basis for acquisitions is attractive, the fundamentals in the targeted real estate markets and sectors remain healthy.”

Partnership with StepStone Real Estate

Testina has partnered with StepStone Real Estate, which will be responsible for sourcing investment opportunities on a semi-discretionary basis. The strategy aims to leverage StepStone’s expertise in private markets and its network of relationships with general partners.

Signer said: “StepStone was identified as the best partner to execute a global value add strategy and capture the “best-in-class” investment opportunities, which are selected in a rigorous screening process, supported by StepStone’s proprietary information database.”

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