The First and Second Swedish National Pension Funds (AP1 and AP2) have formed a partnership backing the creation of a new real estate company targeting investments in Europe. The two pension funds will be joint and equal owners of the new company and have committed total equity capital of €500 million to the venture.
The formation of the company, the name of which has not been disclosed, will enable both funds to establish long-term ownership of real estate in Europe’s most significant markets. The company’s strategy is to invest in commercial real estate, focusing primarily on office properties centrally located in major European cities. Rickard Backlund, former chief executive of Aberdeen Property Investors, has been appointed to chair the new company, and recruitment of a chief executive officer already has begun.
“These investments in real estate can provide us with a solid return relative to the level of risk,” Johan Magnusson, CEO of AP1, said in a statement. “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.”
Eva Halvarsson, CEO of AP2, added: “The form of collaboration chosen provides us with a tailored investment solution which, among other things, is grounded in a shared long-term investment objective and joint requirement of cost-efficient portfolio management.”
During the company’s formation, AP1 and AP2 were advised by Catella, a Stockholm-based financial services and property advisory firm. In addition, the two funds have signed an agreement with Catella, securing its support in terms of resources, competence and expertise during the company’s acquisition phase.
“The initiative adopted by the First and Second Swedish National Pension Funds represents a new form of direct investment in foreign real estate,” stated Johan Ericsson, CEO of Catella. “It unites the capacity and financial competence of these institutions with Catella’s market knowledge and proximity, with a view to creating long-term value.”
AP1 and AP2 are two of five buffer funds within the Swedish national pension system, which are committed to investing Sweden’s pension assets to maximum benefit and to generating a high return at low risk over the long term. At year-end 2010, AP1 and AP2 had around SEK 440 billion in assets under management.