July 7 (Bloomberg) -- The Dutch manager of the world’s third-largest pension fund is trying to add to its investments in warehouses and industrial buildings to take advantage of rising Internet sales in Europe after failing to buy ProLogis European Properties last year.
APG Algemene Pensioen Groep NV, based in Amsterdam, sold its stake in ProLogis European, or PEPR, for 150 million euros ($215 million) last month. APG’s 1.1 billion-euro bid was trumped by Prologis Inc., the U.S. company that manages PEPR, Europe’s biggest warehouse operator.
“We remain keen to expand our exposure to logistics centers because of the consequences of e-commerce,” said Patrick Kanters, who leads the APG team that oversees 21 billion euros of real-estate investments. Kanters, 42, spoke in an interview at his office in Amsterdam.
As more people shop on the Internet, online retailers and transportation companies require larger, more modern centers for storing and handling goods. The increase in demand enabled investors to make an average return of 9.6 percent on industrial real estate in Europe last year, up from 2.8 percent in 2009, according to Investment Property Databank Ltd.
APG managed 277 billion euros of assets at the end of April for Stichting Pensioenfonds ABP, its owner, and six other pension providers, while advising 27 other institutions. The company invested about 1.3 billion euros in real estate last year, ending a hiatus since the end of 2006, after prices declined from levels it considered unattractive.
APG made its offer for PEPR with Goodman Group, Australia’s biggest industrial real estate investment trust by market value. The Dutch company invested 150 million euros in the Goodman European Logistics Fund last year and joined the Goodman-led group that in March completed a A$218 million ($232 million) buyout of ING Industrial Fund, which traded in Sydney.
APG also owns 6 percent of Segro Plc, the U.K.’s largest owner of business parks and warehouses, making it the second- largest shareholder after Blackrock Inc.
The slide in property prices prompted APG’s customers to increase the amount of investment money earmarked for real estate by about 4 billion euros to about 10 percent of their investments, Kanters said. Investing in real estate is a way of hedging against inflation, he said.
“There are decent opportunities to do more deals,” Kanters said. “If more appear, we can be as active as last year.” APG expects investments made in the three years through 2012 to generate returns of more than 9 percent, he said.
APG bought holdings in two shopping centers last year: Westfield Group’s Stratford City mall in east London, which will be Europe’s largest when it opens in September, and the Cap 3000 mall in Nice, France.
More than 40 percent of the property assets that APG manages are retail-related because they are less dependent on economic growth than hotels and offices, Kanters said. Also, the rental income keeps pace with inflation, he said.
APG oversees stakes in many of the continent’s largest real estate companies. They include Unibail-Rodamco SA, Europe’s largest mall owner, and Utrecht, Netherlands-based Corio NV. Together, these two investments are worth a combined 2.4 billion euros.
“The best retail centers in Europe are owned by listed companies,” said Kanters. APG also owns stakes in Simon Property Group Inc., largest U.S. shopping-mall owner, and Kimco Realty Corp.
About 50 percent of APG’s real estate investments are located in Europe and 30 percent are in the Americas, according to Kanters.
“In the long run, we want to increase our exposure in Asia,” which currently accounts for about 20 percent of the real estate assets APG manages, Kanters said.
Aside from backing the ING Industrial Fund buyout, APG’s deals this year include investments in the Harmony China Real Estate Fund and in Century Properties Inc., a residential developer in the Philippines.
--Editors: Andrew Blackman, Jeff St.Onge.
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