Alecta, the Swedish occupational pension manager with around $85 billion under management, is leaving international real estate.
The Stockholm-based investor hired property services firm JLL to put all of overseas property holdings – a portfolio of US and UK properties valued at roughly $2.6 billion – on the block.
“We think it’s a good time for large portfolio trades since the interest for buying volume is quite high at the moment. But in terms of market timing, we have no crystal ball,” added Per Frennberg, CIO of Alecta, in an email to PERE.
Yet, the rationale behind departing direct international real estate investing is not simply to cash in while the going is good, but rather to “streamline” Alecta’s investment business, said Frennberg.
To aid in the streamlining, Alecta is also closing its US and UK operations as it makes a permanent exit from direct overseas real estate to focus on its domestic market. Its US subsidiary Alecta Real Estate Investment and its UK office will either be transferred to a future buyer or closed.
“We will not have any staff based in the UK and US anymore and we don’t plan to upsize our Swedish team significantly,” said Frennberg.
However, Alecta will continue to invest with third-party real estate investment managers. The pension manager held SEK17 billion (€1.85 billion; $2.1 billion) out of a total SEK62 billion real estate portfolio in indirect investments at the end of 2015, according to Frennberg.
“No change in strategy there. 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,” added Frennberg.
Sticking with its investment managers is not surprising for Alecta, given that its Swedish indirect property investments returned more than direct holdings last year.
The institutional-grade portfolio that Alecta has put up for sale comprises 48 assets in the office, retail, multifamily and industrial sectors. The US portion encompasses 22 well-leased properties, worth an estimated $2 billion. It includes 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, as well as three apartment complexes totaling 1,039 units.
The 26 UK properties are valued at around $600 million. The UK portion of the portfolio totals 1.6 million square feet and is weighted 43 percent industrial, 27 percent retail, 24 percent office, and six percent retail/warehouse.
“With current economic instability, the portfolio offers a significant concentration of properties located in resilient markets with strong underlying fundamentals. We expect to see a significant amount of interest from investors across the globe on this offering,” said Peter Nicoletti, director at JLL, which is leading the marketing efforts.
Currently, the assets are being pitched as one mega-portfolio by JLL. The bet is that the pent-up demand from certain buyers for real estate market share means that buyers are willing to pay a premium for large portfolios that can offer such share in one fell swoop.
“Portfolio sale volumes are expected to trend upward in the year ahead as investors seek opportunities for an immediate global footprint. This portfolio offers them a unique position to do just that, while also capturing strong, consistent returns substantially ahead of their competitive sets,” added Nicoletti.
Last year, Europe saw its fair share of mega-portfolio deals including: Paris-based real estate investment manager Amundi Real Estate’s acquisition of the ‘Aqua portfolio’ of properties, which was valued at around €1 billion, from Hamburg-based real estate investment manager Union Investment Real Estate.
In July, AEW Europe, the pan-European real estate investment manager, established a partnership with Chinese sovereign wealth fund, China Investment Corporation, and acquired a portfolio of 10 shopping centers in Belgium and France. The purchase price of the portfolio has not been disclosed but seller CBRE Global Investors valued it at over €1.3 billion.