Cornerstone gears up to launch 'super core' fund in Sweden

Cornerstone Real Estate Advisers is gearing up to launch a 'super core' fund targeting public amenities in Sweden, the company's European head Charles Weeks told PropertyEU at the annual Mipim real estate fair in Cannes on Tuesday.

'We are currently in talks with institutional investors in Sweden and hope to raise an initial EUR 200 mln in a first close,' he said. He added that Cornerstone aimed to raise the initital capital for the unleveraged fund by the second quarter of this year. 'In due course this figure could grow to EUR 500 mln.' The fund is targeting a leveraged IRR of 9.5%.

As part of its strategy, Cornerstone has created SSIPP, the Swedish social infrastructure property partnership, and a number of potential off-market deals have already been identified, Weeks said. He declined to provide details but said the fund would initially target the bigger cities in Sweden including Stockholm and Gothenberg. The types of assets under consideration include universities, schools, prisons and healthcare institutions.

'We see public real estate assets as the new core,' noted Peter de Haas, head of business development. 'The properties will be leased back to their operators on long-term contracts.' Swedish government tenants are very secure, he added, 'It's never happened in Sweden that a government body has gone broke.'

The Swedish public real estate market is 'huge', Weeks added. 'In total, the Swedish state, municipalities and counties own properties worth some EUR 100 bn across the country. Only 10% of that figure is in private hands,' he pointed out.

De Haas said there was consensus across both the right and left of Sweden's political spectrum to bring public assets to the market. 'In many countries, it's a challenge to bring owner-occupied real estate to the market, but Sweden is more advanced in this area.' 'Politicians know they can't fulfil their election promises to reduce taxes without raising new funds,' Weeks added.

Cornerstone Real Estate Advisers is part of the US-based investment manager of the same name. Cornerstone expanded into European private equity real estate with the acquisition in January 2010 of Protego Real Estate Investors. In Europe, it manages some $2 bn of assets in the UK, Germany and the Nordics. Globally the group has $32 bn of assets under management.