DENMARK - Danish industry-wide pension fund PensionDanmark is moving into residential property with a three-year programme to build apartments in three areas of Copenhagen.

"It's a new departure for us," said Claus Stampe, PensionDanmark's chief investment officer. "Previously we have mainly been investing in domestic office buildings, although we have a small amount of residential in our portfolio, and it's the first time we've built something ourselves."

The first phase of the project wills see the construction of 182 flats in Ørstad, which will be ready for occupation by the last quarter of 2006. This will be followed by complexes in Ballerup and Frederiksberg. In all there will be some 360 flats with 35,000 square metres of floor space.

Stampe said that the DKR600m (€80.6m) investment represents about 1.5 percentage point of PensionDanmark's portfolio. Currently 6% of the portfolio is in real estate.

"One reason for the investment is that we anticipate that by standardising bathroom and kitchen fittings across several projects we will be able to cut the costs of what one would typically expect to pay for building a residential flat by approximately 10%," said Stampe.

"The rationale with this kind of investment is to get a more or less stable cash flow that yields above the long-term bond yield," he added. "We expect a return of approximately 200 bps above the present yield on the 10-year government bond. That's attractive given the current yield of 3.30”.

PensionDanmark's 500,000 members are mainly employed within building and construction, commerce, transportation and service.