Kungsleden and GE seal portfolio deal

Listed Swedish property company Kungsleden has signed a binding agreement with GE Capital Real Estate on the acquisition of a portfolio of 84 commercial properties.

As reported earlier, the price came to SEK 5.5 bn (€638 mln). The completion of the deal is in line with the memorandum of understanding announced on 15 August.

The properties are mostly office buildings and are largely situated in Stockholm and Gothenburg. The total leasable area is about 567,000 m2.

The transaction neatly captures a strategic realignment being undertaken by two large investors in Europe. Kungsleden, the deal signals the company’s strategy to move away from opportunistic investment in various segments across Sweden to focus exclusively on economically strong metropolitan areas such as Stockholm and Gothenburg.

Several investors aside from Kungsleden were keen to acquire GE Capital’s good quality assets in Sweden but from the vendor’s point of view the entire portfolio - with the exception of some assets held in joint ventures - and many of its direct holdings across other European markets are non-core. GE Capital Real Estate decided in 2012 to refocus its activities on real estate lending in Europe and the US and to withdraw from new direct property investment in Europe.

'This acquisition fulfills our investment target of SEK 5-6 billion within 18-24 months that was set and communicated in the beginning of this year,' Kungsleden's new CEO Biljana Pehrsson noted. 'The property portfolio fits very well into Kungsleden’s new strategy with a focus on quality commercial properties in attractive locations in growth regions.'

Kungleden is now targeting good quality office assets, a break with the last few years when logistics dominated the €1.3 bn portfolio by value.

About 70% of the portfolio is located in Stockholm and Gothenburg and it will increase Kungsleden’s share of properties in Stockholm, Gothenburg and Malmö to 50% from 30% today. The share of offices will increase to 50% percent from 39% today.

The acquisition does not require Kungsleden to raise any additional equity. Debt financing has been obtained from four leading Nordic banks.