Swedish pension funds to invest EUR 1b in real estate

The First and Second Swedish National Pension funds - AP1 and AP2 - will invest around EUR 1 bn in European real estate via a joint company that will be managed by Catella, Eva Halvarsson, CEO of AP2, told PropertyEU.

The new company, which will focus on centrally-located office properties in major European cities, has total equity capital of EUR 500 mln which, once leveraged, will give the company an investment pot of around EUR 1 bn, Halvarsson said.

‘We will target Europe’s most liquid real estate markets, such as France, the UK and Germany. It’s important to buy the right properties and not to buy in haste. Once everything is in place, we will be able to look at acquisitions,’ she added.

The First and Second National Pension funds are already extremely active real estate investors in their home market. Together with two other Swedish national pension funds, they wholly-own former government-owned real estate company Vasakronan. Real estate accounts for about 5% of the total assets under management in AP1’s portfolio, although it plans to increase the allocation this year.

The new company - which still has to come up with a name - aims to capitalize on AP1 and AP2’s desire to ‘invest in property, directly, outside Sweden,’ Johan Ericsson, CEO of Catella AB, told PropertyEU. ‘We think that this company will be in place by the end of the first half of this year,’ he said. Whilst he said that it was ‘too early’ to talk about target returns, he confirmed that the company would target core properties.

Catella will manage the new joint venture. Rickard Backlund, former CEO of Aberdeen Property Investors, will chair the new firm.

‘These investments in real estate can provide us with a solid return relative to the level of risk. As long-term investors, this presents us with a promising opportunity to complement our other real estate investments in Sweden and elsewhere with a number of well chosen properties in Europe,’ said Johan Magnusson, CEO of AP1 in a statement.

The First and Second Swedish National Pension Funds are two of five buffer funds within the Swedish national pension system. The First and Second Swedish National Pension Funds had pension assets of around SEK 440 bn (EUR48.98bn) under management as of 31 December 2010.