Real estate investment manager Barings has completed the sale of two office buildings on behalf of a value add real estate fund, Breeva I.
Financial details were not disclosed, but Barings noted that disposals from Breeva I - with nine assets now sold - had returned over 89% of equity to investors and achieved a blended IRR on realisations in excess of 30% to date.
Earlier this year, Barings closed its second European real estate value add fund, Breeva II, at its hard cap of €850 mln after receiving €1 bn of client demand, significantly surpassing the target of €750 mln.
Following the successful executions of its business plans for both buildings, the investment manager has disposed of an office scheme in Sweden to Harmerica Properties, a private property company based in Stockholm, and a mixed-use asset in Milan, Italy, to a German institutional investor.
Located at Brahegatan 10 in the central business district of the Stockholm, Barings acquired the 6,100 m2 office in September 2020 with the intention of unlocking value through new lettings, regearing leases and exploring the potential to expand the space through development and the conversion of existing space.
Since then, Barings has successfully re-let 64% of the available office space at 18% above ERV, as well as regeared another tenant lease to 12% above ERV. Alongside this, Barings has prepared for the conversion of attic space into additional office space, as well as secured formal positive pre-notice from the municipality concerning a zoning change for the creation of additional lettable area on the site. The asset is being sold one year ahead of schedule.
Meanwhile, the 9,000 m2 mixed-use asset at Viale Cassala 22 was acquired in March 2019 through an Italian real estate fund managed by Savills IM SGR. Located on Milan’s second ring road and well-connected to public transport, the asset is being disposed of ahead of schedule and leased above ERV, having been fully redeveloped into a modern Grade A product with LEED Gold certification.
The asset is fully let to three office tenants on long-term leases, with new leases also agreed with three out of the four retail tenants.
Andreas Norberg, managing director and head of Nordics real estate at Barings, said: 'The sale of Skvalberget 33 follows a range of value-creation initiatives undertaken by our team in the Nordics and the completion of our business plan for the asset.
'This disposal has delivered strong returns to our investors and further contributes to the impressive track record of Breeva I as a vehicle for value-add European real estate investment.'
Marco Corti, managing director and head of Italian real estate at Barings, added: 'The disposal of Viale Cassala 22 comes ahead of our initial underwriting. This is due to the quality of asset management activity, with the local team having redeveloped the building into a modern Grade A product.
'Despite the Covid pandemic and the challenging economic environment, the office rent achieved is 15% above our original underwriting assumption and the successful disposal is a testament to our understanding of the market and the attractive returns possible from value-add real estate. This therefore reinforces our belief that both Breeva I and Breeva II are in solid positions amid the uncertainty in the market.'
Valeria Falcone, head of European value-add investing at Barings, said: 'The disposals of Skvalberget 33 and Viale Cassala 22 demonstrate how our combination of on-the-ground knowledge and global expertise is a winning one, with the sales marking the latest successes for BREEVA I’s approach on sustainability and product innovation.
'While the current market has its challenges, Barings continues to have appetite to invest in our preferred asset classes of offices, logistics and residential, although we will be uncompromising on both quality and price. We are keen to continue exploring opportunities, including joint venture projects, in our preferred markets of Italy, the Nordics, Germany, France, Spain, the Netherlands and the UK.'