Swedish pension funds AP1, Stockholm, and AP2, Gothenburg, joined forces with TIAA-CREF to create a pan-European office investment platform called Cityhold Office Partnership, which intends to build an office portfolio of at least €4 billion ($4.55 billion).
The joint venture, which has been established and will be managed by TIAA-CREF-owned TH Real Estate, will be seeded with existing properties owned by the TIAA general account and an existing joint venture between AP1 and AP2. That joint venture, Cityhold Property AB, was established in 2011 to invest in real estate in major European cities.
The existing platform is valued at €2.2 billion, and has 15 assets across the U.K., France and Germany. Nine of those assets were contributed by the TIAA general account, and the other six by AP1 and AP2. TIAA-CREF will hold a 50% interest in the new platform, while AP1 and AP2 will each hold 25%.
Cityhold Office Partnership will target a further €2 billion of investment over the next three years, with core investments in tier-one cities including London, Paris and Berlin. It will also invest in value-added opportunities such as leasing, renovation and development, and core investments in tier-two cities, including Madrid and Milan.
The future additional €2 billion of investment will be split in the same way as existing holdings, said a spokesman for AP1, which has 284 billion Swedish kronor ($34 billion) in assets. “The greater capital base provides the company with better opportunities to make good long-term investments in commercial properties,” he wrote in an e-mail.
“The partnership with TIAA-CREF gives us a much better position to successfully build and develop our European property portfolio,” added a spokeswoman for AP2, which has 293.9 billion Swedish kronor of assets, in a separate e-mail. “Through partnership with TIAA we broaden both our capital base and create a more diversified European property portfolio. We complement each other well, have the same long-term view of investment and the same view of the return.”
The transaction is expected to close in September.