REAL ESTATE - Pramerica, Prudential's European investment management subsidiary, is to invest $65m in a venture to acquire Swedish residential on behalf of unnamed US institutional investors and Irish and Dutch pension funds.
The firm said it would invest via AROS, a three-way agreement with Stockholm-based advisers Vencom Property Partners and Samir Taha, a local entrepreneur who specialises in residential conversions.
AROS will acquire and reposition older commercial properties as residential apartments in greater Stockholm and expanding Swedish commuter cities. Its first acquisition, made in July 2006, has developed into a $13m project to convert of a 1904 building into 20 apartments and 11 new-build apartments on an adjacent car park.
The venture partners claim AROS will occupy a niche between large traditional and small, non-professional developers. Pramerica’s Thomas Sipos cited the potential for conversion of high-vacancy office properties into residential as "an arbitrage opportunity we’ve spotted".
Sweden's appeal lies in strong economic growth and an under-supplied residential market. "It’s about demographics," Sipos said, adding that the strategy was not dependent on Sweden’s current 4.5% annual growth rate.
"In pricing, it helps when the economy performs," he said, "but we haven’t factored in continuing economic growth. It could work with flat house prices."