Areim closes its largest fund on €877m

The Nordics-focused manager exceeded its target size by €147m for the fifth fund in its value-add series.

Stockholm-based manager Areim has closed its largest fund since inception, PERE can reveal.

With €704 million in committed capital and an additional €173 million in co-investment capital, Areim Fund V, which entered the market in 2021, comfortably exceeded its target size of €730 million. The vehicle is approximately 28 percent larger than its predecessor; Areim Fund IV closed at the end of 2019 with €535 million in commitments, and a further €150 million secured for co-investments.

The firm has so far deployed around 40 percent of the fund’s capital, PERE understands. Like its immediate predecessor, Fund V focuses primarily on light industrial assets as well as office and residential properties across the Nordics.

Leif Andersson, who founded Areim in 2003 and serves on the board of directors, believes the fundamentals for Nordic light industrial are very healthy at present. “If you look at the leasing market right now, it holds up very well in that segment,” he told PERE.

Areim’s Leif Andersson: a conservative stance

“There is very low vacancy, rents are still going up and there is still a lot of demand. The way the asset class works, with a lot of smaller assets with smaller tenants, means you have a very well diversified tenant base, so you have a very interesting risk-return profile.”

Andersson said that while the majority of the fund’s 14 investors were re-ups with longstanding institutions – almost all of which increased their commitment sizes – the value-add vehicle also attracted a number of new investors. The investor base includes sovereign funds, pension funds and insurance companies from Asia, North America, Europe and the Nordics. Compared with the prior fund, however, North American institutions accounted for a larger share of capital in Fund V.

“One of the things that we think has been important to investors when they’ve been committing is that we have been very prudent in investing over the years,” said Andersson. “We are very much focused on downside protection and take quite a conservative stance on investments. That pays off when we get a lot of new capital, even in times like this.”

Fund V targets gross returns of 15-20 percent for its investors, at a 2x investment multiple. According to Andersson, the firm has averaged a gross return of more than 20 percent across all its products to date, and has never realized a loss.

As the most active market in the Nordics, Sweden represents the primary focus for the fund, with Finland, Denmark and Norway also target markets. With Fund V, Areim will continue its series strategy of investing in underdeveloped assets. “It is very much a buy, fix and sell strategy, while turning brown assets green,” said Andersson.

Against a backdrop of global real estate market dislocation and a widespread slowdown in transaction activity, Areim is positive on the fundamentals of its target markets. “There is, I would say, distress on the ownership side, but on the underlying asset level it is actually pretty healthy,” Andersson continued.

“For players like us, having a lot of capital and being in private equity real estate, it is a very interesting position to be in. I think Fund V could be one of the best ones we have done, given the market situation. It will not be easy to deploy – it never is – but I think we can take a lot of benefits from this correction.”

Evercore acted as placement agent for the fund, and Andulf Advokat as legal adviser.