US financial services giant TIAA-CREF is teaming up with two of Sweden's national pension funds to build a €4 bn-plus pan-European office platform.

US financial services giant TIAA-CREF is teaming up with two of Sweden's national pension funds to build a €4 bn-plus pan-European office platform.

The joint venture, named Cityhold Office Partnership, has been seeded with €2.2 bn of core office space owned by TIAA General Account and the Swedish pension funds AP1 and AP2.

The initial 15-office portfolio comprises 250,000 m2 of core office space across the UK, France and Germany. TIAA-CREF is providing nine properties, with the Swedish funds contributing the other six.

The current portfolio includes 12-14 New Fetter Lane and One Kingdom Street in London, Tour Areva in Paris, and Atlantic Haus in Hamburg.

The transaction is expected to close in September.

Phil McAndrews, senior managing director and chief investment officer at TIAA-CREF Global Real Estate said: 'Our investing partnership with AP1 and AP2, like-minded investors who share our long-term investing horizon and focus on high-quality assets, enables us to further diversify TIAA’s existing European office portfolio across asset, tenant and market exposures, while establishing a broader platform to expand our European investments.'

Growth strategy
TIAA-CREF initiated the Cityhold Office Partnership and TIAA-CREF's European property business, TH Real Estate, will manage the venture, providing investment and asset management services.

'This joint venture represents a great opportunity to merge global expertise in the office sector, with a common approach to value creation,' said Mike Sales, managing director Europe, TH Real Estate. 'We are strategically aligned with TIAA-CREF, AP1 and AP2 in their ambitions to create long-term value from this platform, which we are committed to growing significantly over the next few years. We look forward to managing and advising the platform on behalf of these market leading investors.'

The Cityhold Office Partnership will commence an active investment programme, with new capital from the TIAA General Account, AP1 and AP2, targeting an additional €2 bn of investment over the next three years.

Cityhold Office Partnership will primarily target core investments in Tier 1 cities such as London, Paris, Munich, Hamburg, Frankfurt and Berlin. Additionally, the investment programme will invest in value-add opportunities such as leasing, renovation and development opportunities in Tier 1 cities, or stabilised core investments within Tier 2 cities, that include Madrid, Milan and Amsterdam, among others.

TIAA-CREF will hold a 50% interest in the vehicle and each AP fund will hold 25%. The joint venture extends the long-term investing relationship between TIAA-CREF and AP2. The pair have been co-investing with TIAA-CREF since 2011 in various real asset strategies, including TIAA-CREF’s timberland strategy and a farmland company focused on the US, Australia and Brazil.

Cityhold
Cityhold is not a new name in European office investment. AP1 and AP2 formed Cityhold Properties in 2011 to acquire up to €1.1 bn of core office properties in Europe and hold them for up to 40 years. The assets it owns are being contributed to the new joint venture with TIAA-CREF.

Eva Halvarsson, CEO of AP2, said: 'In 2011, in partnership with AP1, we established Cityhold Property AB, with a view to investing in real estate in the major European cities. Now that Cityhold’s property portfolio is being merged with TIAA-CREF’s European portfolio of commercial real estate, we have successfully enhanced and diversified the portfolio of European real estate, in line with the strategy originally outlined for the company. Moreover, with TH Real Estate, we gain an operating partner of considerable expertise, especially with regard to local markets.'