AP3, PREI form German retail JV

The Third Swedish National Pension Fund is clubbing together with Pramerica Real Estate Investors to invest in retail properties across Germany and has €265 million of deals in hand.

Pramerica Real Estate Investors, the European arm of Prudential Financial's real estate investment management division, has revealed the formation of a joint venture with the Third Swedish National Pension Fund, AP3, to buy retail properties across Germany.

The joint venture already has acquired a first portfolio and has agreed to acquire a second portfolio of grocery-anchored retail properties from funds managed by Taurus Investment Holdings. The Boston-based private equity real estate firm is retaining a minority stake in both transactions, making it a partial realization therefore.

The two deals together represent €265 million of investment in the sector for the new partners and will see majority ownership of the assets transfer to AP3 and Pramerica. Those assets were held in Taurus' Euro Retail Fund I and II, which were launched when the firm made a return to the German real estate sector in 2004. The portfolio contains shopping centers dotted across Germany, including near Munich, Frankfurt and Wiesbaden.

Reacting to the joint venture, Klas Akerback, senior portfolio manager at AP3, said the Swedish fund saw the potential for “attractive risk-adjusted returns” in established German regional grocery-anchored retail. “The tenants are strong companies and existing sites will benefit because stricter planning rules make new construction difficult,” he added.

Meanwhile, Sebastiano Ferrante, head of Germany at Pramerica, said: “The German market offers good prospects for retailers amid low unemployment, low household debt and rising wages. Grocery-anchored retail properties continue to fill a critical need in the market despite the growth of online sales, leading some retailers to expand and providing our investors with attractive opportunities.”

For Taurus' part, it was reported last year how the firm had tried to sell assets in Germany. After that plan petered out, the firm pondered acquiring more assets to build a €1.5 billion portfolio in order to launch an initial public offering.

Speaking of the deal to sell to AP3 and Pramerica, Taurus founder Lorenz Reibling said: “We are pleased to have found a strong and experienced partner that enables us to continue Taurus Euro Retail Funds I and II and are looking forward to working with Pramerica and AP3. We share their positive outlook on the German retail real estate sector.”