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Blackstone, Goldman buy Alecta's UK, US assets

The Swedish pension fund has been marketing its international real estate assets in an effort to focus domestically.

Blackstone is buying Swedish pension fund Alecta’s US assets in a $1.8 billion deal, sources with knowledge of the sale told PERE. Goldman Sachs is reportedly acquiring the fund's UK properties, which are worth about $450 million.

Alecta hired commercial real estate services firm JLL in April to sell its international real estate holdings. Goldman Sachs was the first winner for the entire UK and US portfolio, but during its research process, a disagreement between the firms arose and the investment bank lost the deal, according to Bloomberg

The intended disposition was part of an effort by Alecta to focus on its domestic market and streamline its business, Per Frennberg, Alecta’s chief investment officer, said in an April statement.  

“Our foreign operations have been extremely successful in consistently generating above average returns but they have always been a bit of an organizational anomaly in our streamlined business, which prioritizes economies of scale within our investment strategy,” Frennberg said. “The current strong demand for global real estate offers a good opportunity for us to take yet another step in our development towards our vision, to be the most efficient occupational pension fund in the world.”

The pension fund, which manages SKr721 billion ($85 billion; €76 billion), sought to sell 22 well-leased properties in the US and 26 assets in the UK, PERE previously reported. Its US portfolio included 10 office buildings totaling 1.1 million square feet, six grocery-anchored retail properties, two high-street retail buildings, one mixed-use industrial and office property, and three apartment complexes totaling 1,039 units. The 26 UK assets total 1.6 million square feet and is weighted 43 percent industrial, 27 percent retail, 24 percent office, and six percent retail/warehouse.

Both Alecta and Blackstone declined to comment, but PERE understands that capital for the purchase came from Blackstone’s core-plus platform, Blackstone Property Partners.

The firm’s open-ended fund had $11.9 billion in committed capital as of June 30, according to the firm’s second-quarter earnings. BPP had a 15 percent net internal rate of return as of June 30. One major investor in the fund is the California State Teachers’ Retirement System, which allocated $500 million, according to PERE research.

“We think it’s a good time for large portfolio trades since the interest for buying volume is quite high at the moment,” Frennberg wrote in an April email to PERE.

Despite Alecta’s renewed focus on domestic direct real estate, the pension plan will continue to invest with third-party real estate investment managers. The pension manager held SKr17 billion ($2.1 billion; €1.85 billion) out of a total SKr62 billion real estate portfolio in indirect investments at the end of 2015, according to Frennberg.

“No change in strategy there,” added Frennberg. “However, given that we will leave our hubs in London and San Francisco, our investment activity, at least in the near term, will be more focused on our domestic market.”

Alecta’s most recent publicly disclosed US acquisition was the June 2015 purchase of three office buildings in Phoenix, Arizona, according to real estate data provider Real Capital Analytics. The pension fund partnered with Los Angeles-based Lowe Enterprises to buy the portfolio for $76 million from Oaktree Capital Management and Pearlmark Real Estate Partners.