Pramerica Real Estate Investors has announced the formation of a follow-on second joint venture with local partners Aros Management AB, for residential conversion and development in Sweden. In total the joint venture intends to invest SEK 220 million (25 million), which with leverage has the potential to provide a total investment capability of up to SEK 725 million (82 million).
Pramerica's London-based Merchant Banking Group structured the investment on behalf of institutional investors, providing further exposure to Sweden, a country that is enjoying strong economic growth, and its undersupplied residential real estate market. Pramerica is the European real estate arm of Pramerica Financial's real estate investment and advisory business, which is headquartered in the United States.
This commitment follows on from the earlier commitment to Aros made in 2006 that has been fully invested in five buildings of more than 31,000 m² with a total investment cost of approximately SEK 1 billion (115 million).
Aros was formed in 2006 to act as manager on behalf of the first venture with institutional funds managed by Pramerica and is headed by Samir Taha, CEO and Per Rutegård, CFO.
The partnership has launched the commitment to acquire a 9,400-m² office building in central Stockholm with the intent to convert this into 110 residential units. Further transactions are under review.
"Our successful relationship with the Aros team has provided us expertise in an area which has historically proved very successful for Pramerica's clients, despite the headwinds of the last few years. The continuation of the joint venture is a natural progression, which we are very excited about," said Philip Barrett, Managing Director of Pramerica.
"We see the Stockholm residential market as an attractive opportunity for the creation of new residential units due to the scarcity of supply and clear market demand."
"We are very pleased with the continued confidence from Pramerica and the opportunity to enhance our successful relationship even further. In spite of a global financial crisis and at times a volatile housing market, we see the forthcoming joint-venture as confirmation that our management team has succeeded in delivering value to our investors. We believe our strategy of repositioning existing commercial buildings to attractive residential units in the Greater Stockholm area has great potential as the market is undersupplied, and local demographic changes are likely to increase the undersupply further over the coming years" said Samir Taha, CEO of Aros Management AB.