TIAA-CREF, AP1 & AP2 create strategic JV to invests in European office properties

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

TIAA-CREF’s affiliate, TH Real Estate, brought the parties together and will manage the vehicle on the investors’ behalf, providing investment and asset management services.

The joint venture will be seeded with existing properties owned by the TIAA General Account, AP1 and AP2, creating an initial platform valued at EUR2.2 billion/USD2.52 billion. The venture will also commence an active investment program with new capital from the TIAA General Account, AP1 and AP2 targeting an additional EUR2 billion/USD2.29 billion 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 program will invest in ‘value-add’ opportunities such as leasing, renovation and development opportunities in Tier 1 cites, or stabilised core investments within Tier 2 cities that include Madrid, Milan and Amsterdam, among others.

Phil McAndrews (pictured), Senior Managing Director and Chief Investment Officer of TIAA-CREF Global Real Estate, says: “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. Working collaboratively with two established players in the European office space is exactly the type of growth opportunity we envisioned for TH Real Estate when we launched the firm in 2014 and acquired full ownership earlier this year.”

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.”

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 15 seed assets, (9 contributed from the TIAA General Account and 6 from AP1 & AP2), total 2.7 million square feet and include 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 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 two farmland investment partnerships spanning numerous geographies across North America, South America and Australia.

Real estate has been a key part of TIAA-CREF’s investment platform since 1934 and represents $86 billion in assets under management, as of June 30, 2015. TIAA-CREF has deep exposure across the office, retail, industrial and multifamily sectors, and is a leading joint venture partner to sovereign wealth funds and pension funds around the globe seeking high quality exposure to prime U.S. real estate assets in top-tier markets. TIAA-CREF’s global real estate platform includes TH Real Estate’s $28 billion in assets under management across 50 funds and mandates.

The transaction is expected to close in September.