EUROPE NEWS: Heading to Europe’s core

At the very end of August, TIAA-CREF Global Real Estate and the Swedish National Pension Funds AP1 and AP2 joined forces to establish a joint venture with the aim of creating a €4 billion-plus pan-European office investment platform.

The newly formed investment vehicle will be named Cityhold Office Partnership, with TIAA-CREF holding a 50 percent interest and each AP fund holding 25 percent. The platform is to be seeded with 15 assets, (nine contributed from the TIAA General Account and six from AP1 and AP2) currently valued at €2.2 billion.

The aim of the platform is to get greater exposure to core investments in Tier 1 cities such as London, Paris, Munich, Hamburg, Frankfurt and Berlin. TH Real Estate will have the ability to move up the risk curve and invest in value-add opportunities such as leasing, renovation and development opportunities in Tier 1 cites, or stabilized core investments within Tier 2 cities that include Madrid, Milan and Amsterdam, among others.

“Our investing partnership with AP1 and AP2 – like-minded investors who share our long-term investing horizon and focus on high-quality assets – enables us to further diversify TIAA’s existing European office portfolio across asset, tenant and market exposures while establishing a broader platform to expand our European investments,” commented Phil McAndrews, senior managing director and chief investment officer of TIAA-CREF Global Real Estate, at the time.

Yet, TIAA-CREF is not the only US-based fund manager playing core’s long game in Europe. Cornerstone Real Estate Advisers, the Connecticut-based fund manager, hired Jorge Duarte as a European director of fund management earlier this summer and announced plans to launch a core pan-European fund which will be seeded with capital from Cornerstone’s parent, MassMutual Financial Group, with between $100 million and $200 million.

Scott Brown, global chief executive officer and president of Cornerstone Real Estate Advisers, previously wrote in an op-ed article for PERE that the opportunity in core Western European commercial real estate is something fund managers should be excited about.

He said: “A dearth of development starts in the post-GFC era, now in its seventh year, means that the supply of core modern accommodation is increasingly in short supply and rent growth expectations are rising. That is especially the case for the better quality core stock. Accelerating growth means core commercial real estate yields are likely to continue on a downward path as the recovery gains traction.”