Barings Demonstrates Conviction in Future of Office With €72 Million Stockholm CBD Value Add Acquisition
Sep 01, 2020
Barings, one of the world’s largest diversified real estate investment managers, announces that it has completed the c.€72 million off-market acquisition, on behalf of institutional investors, of Skvalberget 33, a 6,185 sq m office building in the CBD of Stockholm, Sweden from BLDG Holding AB. The transaction underlines Barings’ conviction in the continued importance of the office as the central focus of businesses’ working practices.
Comprising eight-storeys Skvalberget 33 is fully let to four tenants on leases, with an average of 2.6 years to break, and is currently significantly under-rented. Current occupiers include Academic Work, Meltwater and Stratsys. The final tenant, Beckmans Design School, which occupies three floors, has indicated that it intends to exercise its lease break in 2.5 years, presenting an opportunity to upgrade this space, as part of a wider asset management plan, and capture reversion.
Barings also intends to upgrade the entrance hall and communal facilities, including changing rooms and bicycle storage. Barings has also identified the potential to increase the asset’s total lettable area, subject to planning, by developing additional office space of c. 3,500 sq m on the courtyard, as well as converting the attic space into a further c. 400 sq m of office space whilst also creating an outside roof terrace.
Skvalberget 33 is situated in an excellent location in the Eastern part of CBD Stockholm, Sweden’s economic and political centre, close to local amenities including several of Stockholm’s most popular and well-known restaurants and bars, and within two minutes’ walking distance of Östermalmstorg subway station, connecting to Stockholm Central Station. The building is also situated opposite one of the entrances to the well known and popular Sturegallerian, a high end retail and leisure destination which is currently undergoing a major transformation as part of the revitalisation of one of Stockholm’s most important neighbourhoods. Sturegallerian is being developed to include office, housing, retail and hotels of the highest standard.
This latest acquisition grows Barings’ portfolio in Scandinavia to approximately 170,000 sq m across a range of sectors including offices, logistics, retail and residential. Barings’ investment strategy in the region is focused on logistics investments in the top ten logistics locations in the Nordics; selected office assets with turn around potential in the Nordic capital cities; and high quality residential buildings located in attractive commuter areas near to Stockholm, Copenhagen and Helsinki.
Gunther Deutsch, Managing Director, Head of Real Estate Transactions – Europe at Barings, commented: “While a large proportion of the world’s office staff have been working from home successfully over the last few months as a result of government enforced lockdowns, we firmly believe that, for many reasons, offices will continue to play a vital role for all businesses, particularly in relation to fostering culture, improving collaboration and creativity, as well as nurturing and attracting talent. We believe that in a post COVID-19 world demand will more than ever be focused on brand new or newly refurbished offices in CBD locations that offer flexibility of workspace, as well as strong technological and sustainability credentials.
“Furthermore, at a time when many deals are being cancelled or delayed due to COVID-19 travel restrictions, this transaction, as well as our recently announced acquisition of a Swedish sale & leaseback logistics portfolio, clearly demonstrate how Barings’ local office network affords us a real competitive advantage at this current time. With feet on the ground in our target eight countries across Europe and €1bn of transactions currently in the pipeline we can thoroughly assess investment opportunities firsthand, allowing us to provide the speed and certainty of execution that are so important to vendors.”
Thorsten Slytå, Managing Director, Head of Scandinavia at Barings, added: “Given the fierce competition within the value add segment, we are extremely proud to be able to source an off market acquisition like this. Each year only a handful of assets are traded in the Eastern part of the CBD, the most attractive part of the city. Stockholm remains one of the world’s top cities for business, innovation and quality of life."
“Our off market acquisition of Skvalberget 33 reflects both our belief in the continued robustness of demand for office space in the city, coupled with its low supply, as well as the property’s ongoing attractiveness given its strong CBD location, low current rental levels and our own future conservative rental income assumptions. The fact that none of the building’s occupiers have asked for rent reductions following the outbreak of COVID-19 further strengthens that belief. We see a clear sign that modern companies today need to have an excellent location for their offices with great commuter possibilities to be able to attract and keep the most talented employees. This ongoing trend has shown to be even more important during the COVID-19 pandemic.”
Barings Real Estate
Barings Real Estate (BRE) offers a broad range of global investment opportunities across the private debt and equity real estate investment markets. BRE invests in all major property sectors and offers a broad range of financing solutions to real estate borrowers. BRE also specializes in providing government and government-sponsored entity lending products through our wholly owned subsidiary, Barings Multifamily Capital. Follow us on LinkedIn at www.linkedin.com/showcase/barings-alternative-investments.
Barings is a $346+ billion* global financial services firm dedicated to meeting the evolving investment and capital needs of our clients and customers. Through active asset management and direct origination, we provide innovative solutions and access to differentiated opportunities across public and private capital markets. A subsidiary of MassMutual, Barings maintains a strong global presence with business and investment professionals located across North America, Europe and Asia Pacific. Learn more, at www.barings.com.
*As of June 30, 2020
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