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AP3 completes venture into public real estate

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SWEDEN - Tredje AP-fonden (AP3), the Third Swedish National Pension Fund, has completed the purchase of a 50% stake in Hemsö a subsidiary of the real estate firm Kungsleden AB.

The transaction covering 239 properties valued at around SEK14.6bn (€1.34bn), was originally announced in December 2008 with the change of ownership scheduled for 4 May 2009, but was conditional to approval from the Swedish Competition Authority.

Properties owned and managed by Hemsö are mainly public properties such as retirement homes, care homes and schools.

It is understood the property yield is 6.3% based on net operating figures from 2008, while the total rental value is around SEK 1.3bn.

Hemsö, which will be jointly-owned by AP3 and Kungsleden, owns properties across Sweden although they tend to be concentrated in major city regions, as tenants include municipalities, counties and local authorities as well as private companies, with generally long leases of around seven years.

Following the announcement of the joint venture in December, AP3 claimed the purchase provided a "unique opportunity to diversify its portfolio in the direction of a major holding of public buildings".

Kerstin Hessius, chief executive of AP3, said at the time that Hemsö properties were part of the real estate sector that has low risk and stable long-term leases, and suggested the "return on this type of land is relatively uncorrelated with shares and interest rates, which gives a positive diversification of our portfolio".

She pointed out as a pension fund with a long-term commitment "this investment fits well into our overall portfolio through diversification of assets, low risk and stable returns", and added the pension fund believes the market offers many interesting business opportunities that Hemsö is "well equipped to seize".

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com

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