Seeking higher return expectations than the up to 4 percent that prevail in real estate investment in Copenhagen and Aarhus, the Pension Fund of Early Childhood Teachers, PBU, has chosen to invest +100 million DKK (+14 million USD) in investments consisting of 64 residences in a former ferry berth in Nyborg, Denmark.
The investment, which was presented at a press conference at Nyborg Town Hall last Friday, is just the first result of a new cooperation agreement that PBU and project developer Kuben Management entered into before Christmas, the partners report to FWAM sister site EjendomsWatch.
"There's more in the pipeline, but naturally it has to be the right locations. We want to be a little selective, so you'll probably not find PBU in the hottest locations," says Ib Jansholt, real estate consultant at PBU, where pension assets total just over DKK 60 billion. (approx. USD 8.5 billion)
At Kuben Management, CEO Ulf Christensen confirms that more real estate projects are on the way, either with PBU or with other pension funds.
"We're underway in Aalborg in northern Jutland. We're looking into the Fredericia and Kolding area in eastern Jutland. We're underway in Odense in central Denmark, and and we 're looking into some of the cities in the Greater Copenhagen Area where you get a little further away, but with interesting locations, close to something recreational, but also close to the city. So we have something like 10-12 projects that we are looking to proceed with," says Christensen
Focus on potential residents 55 and older
He makes no secret of the fact that the target market for the future residences in Nyborg – people over age 55 – is presumed to attract the interest of other pension funds.
"When you are over 55 years of age, how does your life situation look? Maybe a smaller home can be set aside as a rental accommodation for when the grown children come home. Or an extra bedroom that could be used as a nursery, but also as a guest bedroom. there's also the matter of the number of bathrooms in the residence, and whether it is possible to get around in a wheelchair in the long run," says Christensen.
"We are working on getting other pension funds to join the concept. That is also run by PBU," he continues.
Back at PBU, real estate consultant Ib Jansholt says that Kuben's many years of experience in cost effective construction for Danish cooperative housing societies has made the project developer an ideal partner.
Expecting higher returns than in big cities
The real estate investments are in no way new territory to PBU, which collected what one might describe as ample returns on the ownership of 14,000 residences in different growth areas in China.
What do you expect in returns from Nyborg?
"There's more than the 4 pct. or less that you see in Copenhagen and Aarhus. But we have no requirements as such, other than somewhat higher returns than what Copenhagen and Aarhus offer," says Jansholt.
PBU has approx. 8 percent of its assets in real estate, and as the pension fund grows as the number of teachers increases, the pension fund needs to invest more in real estate. Jansen describes the 8 percent as "a good level", but it could be more.
Partnership improves security
At Kuben Management, having a big long-term investor like PBU on board as partner creates an atmosphere of comfort and safety. By virtue of the company's experience in construction development for i.a. the common sector, it has the competences to present the right sites and opportunities to PBU.
"We find the sites and figure out their potential and whether the case is interesting and able to give the returns that PBU wants. We help buy the property and get the project started, and then we run the whole project development.
For a comfortable return?
"Our fee is satisfactory. Of course we had to sit down and figure out how to balance the risk, because we could chase a lot of project development opportunities without reaching the goal we desire. But in this partnership, PBU is willing to buy the property if it gives the returns that they want. That way we obtain the property, which is often the big challenge within project development in the first place because you never know what might happen," says Christensen.
Also bid for property in Copenhagen
State railway DSB put the property in Nyborg up for sale which Kuben won with their bid because they had an investor ready, and they could even bid for a different DSB property in Copenhagen, where Aarhus-based investor Bricks took part.
Prior to the investment in Nyborg, market research company Exometric mapped out the investment opportunities and supplied essential knowledge of everything from demographics to business opportunities in the area. The company has since joined the Nrgi group of companies, which Kuben is also part of.
"The Danish real estate business has for many years been dictated by what one believes. A structured report gives a much better basis for discussion and decisions," says Christensen.
English Edit: Marie Honoré