REAL ESTATE - Public sector scheme Pension-Fennia is to invest €200m – 30% of its real estate allocation – in overseas indirect property amid increasing concerns over potential volatility in the Finnish market.
Timo Stenius, director of real estate investment for the fund, said: “Times are changing and so are property values. Values change sharply in smaller countries and we’re prepared for volatility in the Finnish market.”
It will be the first time the fund has invested in overseas real estate markets. It is looking to invest in major European cities – Paris, London, Milan, Madrid and Frankfurt – although Stenius said it would consider investing “wherever there’s liquidity”. Real estate makes up €600m – 11% of the fund’s total portfolio.
The proposed investment will take place over the next three-five years. “We’re in no hurry,” said Stenius. “The Finnish market is hot; values and prices are high. We’re ready to move quickly but at the same time we can wait for some years for better pricing opportunities.”
The fund also said last week that it was working with Cushman & Wakefield to set up a Finnish real estate club to match the Danish winner of the recent IPE Real Estate awards. The Danish Real Estate Club started when five pension funds collectively worth €45bn agreed to work together collaboratively.
“The more capital you can put together, the more power you have in terms of cost-saving, bargaining and information sharing,” said Julian Schiller, head of indirect investment at Cushman & Wakefield.
In Finland, Cushman & Wakefield is targeting life insurance firms and pension funds with a similar framework, though he said Finnish pension funds would likely invest less than their Danish counterparts. “We proved it works.”
The model could be applicable to other markets, he said, though he added that C&W would focus for the time being on making it a success in Denmark and Finland.
“It only works where pension funds and insurance companies have a collaborative mentality. In the UK, pension funds would be too competitive.”
Elsewhere, Swedish private equity fund Svaefastigheter II is to acquire eight retail properties in Tampere, Pori and southern Finland for €15m.
It follows the fund’s acquisition in April of retail property portfolio in southwest of the country. Asset manager HGR Property Partners, which partnered Svaefastigheter in both portfolios, will hold minority stakes.