A few months ago, Michael Bruhn was confronted with a choice that changed his career. The former head of the Nordic region for Valad Europe – the platform that The Blackstone Group took over in 2011 – had been feeling it might be time for a change. Indeed, he had been with Valad for 10 years through its various ownership changes.
Then, out of the blue, a call came asking if Bruhn would be interested in becoming the managing director for real estate at PFA, Denmark’s largest private pension plan, which wanted to take its €2.2 billion property portfolio more international. It turned out to be an offer too good to refuse, so Bruhn exchanged his role as fund manager for that of institutional investor.
Compared to its peers, PFA felt it was under-allocated to property at 5 percent of assets. To rectify that, it agreed to a new strategy to increase its allocation to 10 percent and do so with full flexibility via direct deals, traditional fund investments and club transactions and joint ventures in Europe, Asia and the US. The expansion strategy was agreed in March, when Bruhn joined.
In an interview with PERE, Bruhn said the first deal that PFA struck upon his joining was, in fact, a domestic development in Copenhagen’s harbor area, where the pension has plans for a 700,000-square-foot commercial and residential project. However, the second deal he and the pension have struck is more in keeping with PFA’s desire to increase its international exposure and better balance its Danish holdings, currently representing 90 percent of its property portfolio.
Last month, PFA announced the purchase a €100 million limited partner interest in Nordic Real Estate Partners’ industrial fund from Swedish pension SPP, which has decided to wind down its indirect portfolio because of Solvency II capital requirements. PFA acquired the secondary stake at net asset value, securing the deal ahead of other bidders from the Nordics, other parts of Europe and North America. The fund’s assets – 25 prime logistics properties throughout the Nordics – have a current value of SEK 3.6 billion (€415 million; $556 million).
“It gives us an instant return on our investment, and the return profile is very attractive,” said Bruhn. “It is a good opportunity to move some capital quickly into the market and get some instant return.”
In addition to the secondaries deal, Bruhn said PFA is close to making a €50 million commitment to an undisclosed UK opportunity fund manager as it continues to roll out its global program. That expansion eventually will involve the US and Asia, most likely through traditional fund formats.
“We are open to international expansion across the spectrum, from core and core-plus to value-added and opportunistic,” Bruhn said. “The further we move away from our home market, the more indirect we want to go. In the markets that are closer to us and that we feel we understand better, we are happier to be at the board table with a little more control.”
Sweden gets real
Kåpan, the government pension plan for public sector employees, wants to increase and internationalize property-related assets
Kåpan Pension, the pension plan for Swedish government employees, has created the new post of head of alternative investments as it looks to grow its real estate-related assets.
As PERE revealed last month, the Stockholm-based pension, which manages around SEK 53.7 billion (€6.1 billion) in assets, has hired Mikael Huldt, the current senior port-folio manager of alternative assets at Tredje AP-Fonden, otherwise known as AP3, to lead the initiative. Huldt, who left AP3 on June 20, starts at Kåpan on September 1.
Huldt declined to comment beyond confirming his appointment. However, according to the pension plan, in
December, it settled upon an allocation to alternatives, including real estate-related assets, of between 5 percent and 20 percent. Its latest annual report states that the pension currently has SEK 5 billion of property-related investments – or 9 percent of the overall portfolio.
Although assets in currencies other than Swedish krona may not exceed 10 percent of total assets, it is understood that the new head of alternatives is being tasked with growing, diversifying and internationalizing its existing real estate-related portfolio, which consists mainly of property, timberland and infrastructure.