Swedish Funds Target €4B Real Estate Investment

AP1 and AP2 team up with property specialist TIAA-CREF to build out their joint property portfolio.

Two of Sweden’s national pensions have collaborated with asset manager TIAA-CREF to create a €2.2 billion ($2.5 billion) real estate joint venture. 

AP1 and AP2—which between them run roughly €57 billion within Sweden’s national pension system—and TIAA-CREF aim to invest a further €2 billion into real estate through the arrangement in the next three years. 

The two pensions first pooled their resources in 2011, creating Cityhold Property AB. Since then, the funds have bought six “core” assets. The new vehicle—known as Cityhold Office Partnership—replaces this and adds nine properties owned by TIAA-CREF in the UK, France, and Germany.

New investments will target core investments in these countries as well as “value-add” opportunities in other major European cities.

Johan Magnusson, CEO of AP1, said a larger pool of capital would present better opportunities for long-term investment in commercial property. AP2’s CEO Eva Halvarsson added that the arrangement has “successfully enhanced and diversified the portfolio of European real estate in line with the strategy originally outlined for the company”.

TIAA-CREF subsidiary TH Real Estate manages the vehicle. Jasper Gilbey, director at TH Real Estate, said the venture’s target markets were selected “on the basis of their long run structural trends”, including demographics, technology, and sustainability.

The Swedish funds’ expansion of their property investments comes as Norway’s sovereign wealth fund is ploughing 5% of its €724 billion portfolio into real estate. The Government Pension Fund—Global had 2.7% invested in the asset class at the end of June, according to its second quarter report. The allocation posted a 2% return in the second quarter, while the fund’s equity and bond portfolios both lost money. 

Next month’s edition of CIO Europe carries an interview with AP1 CIO Mikael Angberg covering infrastructure, collaboration, and the fund’s Innovation Award-winning governance processes. Sign up now to receive your copy. 

Related: Sovereign Wealth Funds’ Real Estate Rush & Bespoke Deals on the Rise in Real Estate