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TH Real Estate spearheads strategic partnership to invest in European office properties

TIAA-CREF, a leading financial services provider, and the Swedish National Pension Funds AP1 and AP2, have agreed to combine forces, in a new joint venture to create a leading, pan-European office-investment platform.

TH Real Estate, who brought the parties together, has established the platform for the joint venture and will manage the vehicle on the investors’ behalf, providing investment and asset management services.

The joint venture, which will be seeded with existing properties owned by the TIAA General Account, AP1 and AP2, creating an initial platform valued at €2.2bn, comprises 250,000 sq m of core office space across the UK, France and Germany. With 15 assets (nine contributed from the TIAA General Account, and six from AP1 and AP2), the current portfolio includes landmark assets, such as 12-14 New Fetter Lane and One Kingdom Street in London, Tour Areva in Paris, and Atlantic Haus in Hamburg.

The venture will commence an active investment programme, with new capital from the TIAA General Account, AP1 and AP2, targeting an additional c.€2bn of investment over the next three years. It will primarily target ‘core’ investments in Tier 1 cities such as London, Paris, Munich, Hamburg, Frankfurt and Berlin. Additionally, the investment programme will invest in ‘value-add’ opportunities such as leasing, renovation and development opportunities in Tier 1 cities, or stabilised core investments within Tier 2 cities, that include Madrid, Milan and Amsterdam, among others.

The newly-formed investment vehicle will be named ‘Cityhold Office Partnership’. TIAA-CREF will hold a 50% interest in the vehicle and each AP fund will hold 25%. The joint venture extends the long-term investing relationship between TIAA-CREF and AP2, which has been co-investing with TIAA-CREF since 2011 in various real asset strategies including TIAA-CREF’s timberland strategy and a farmland company focused on the United States, Australia and Brazil. 

The transaction is expected to close in September.

Phil McAndrews, Senior Managing Director and Chief Investment Officer of TIAA-CREF Global Real Estate said: “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.”

Mike Sales, MD, Europe, TH Real Estate, said: “This joint venture represents a great opportunity to merge global expertise in the office sector, with a common approach to value creation. We are strategically aligned with TIAA-CREF, AP1 and AP2 in their ambitions to create long-term value from this platform, which we are committed to growing significantly over the next few years. We look forward to managing and advising the platform on behalf of these market leading investors.”

Jasper Gilbey, Director at TH Real Estate and lead adviser of the investment vehicle, added: “Our strategy will be to target core-office opportunities across Europe, with a focus on low risk, liquid markets such as London, Paris, Hamburg, Munich, Berlin and Frankfurt. While the venture will focus on core opportunities, it will also consider value-add opportunities within these core Tier 1 markets, as well as stabilised opportunities in other key European cities, as a means of boosting performance and generating attractive risk-adjusted returns. In addition to liquidity and diversity, the target markets have been selected on the basis of their long-run structural trends, such as demographics, technology and sustainability, which we expect to drive strong growth prospects and result in enhanced investment performance in the long-term.”

Eva Halvarsson, CEO AP2 said: “In 2011, in partnership with AP1, we established ‘Cityhold Property AB’, with a view to investing in real estate in the major European cities. Now that Cityhold’s property portfolio is being merged with TIAA-CREF’s European portfolio of commercial real estate, we have successfully enhanced and diversified the portfolio of European real estate, in line with the strategy originally outlined for the company. Moreover, with TH Real Estate, we gain an operating partner of considerable expertise, especially with regard to local markets.”

Johan Magnusson, CEO of AP1, said: “We are excited to merge the existing Cityhold properties with those owned by TIAA-CREF, while also making a commitment to make further investments in the coming years. The greater capital-base provides the vehicle with better opportunities to make good long-term investments in commercial properties, in a number of selected large European cities.”

Issued by Henderson Real Estate Asset Management Limited, 201 Bishopsgate, EC2M 3BN. Authorised and regulated by the Financial Conduct Authority. TH Real Estate is a name under which Henderson Real Estate Asset Management Limited provides investment products and services. The value of investments and any income will fluctuate (this may be partly be the result of exchange rate fluctuation) and investors may not get back the full amount invested. Where opinions have been expressed, they are based on current market conditions and are subject to change without notice.

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