Starwood Capital Group is seeking to enter the Swedish rented residential market through its first European take-private since 2014.
The Greenwich, Connecticut-based firm offered to buy Victoria Park in a deal valued at SKr 8.68 billion ($1 billion; €840 million) on Sunday. A spokesman for the firm declined to comment beyond the announcement. The Malmö-based residential developer owned 13,500 apartments as of December 31, according to its website.
“As one of the largest multifamily owners in the US, with over 100,000 units currently under management, we believe that we are an appropriate investor to back Victoria Park in the next phase of its capital-intensive investment program to upgrade its properties,” Caleb Mercer, a Starwood vice president, said in Sunday’s statement.
To finalize the deal, Starwood must present an offer document at the end of April. Victoria Park shareholders then have a month to approve the offer. If the deal goes through, Starwood would work with Victoria Park’s management team to expand the business, according to the statement.
The firm would manage Victoria Park’s assets through Starlight Residential, a newly-formed holding company owned through Starwood’s latest opportunistic real estate fund, Starwood Global Opportunity Fund XI. The opportunistic vehicle closed last month at $7.6 billion, PERE previously reported.
Starwood began investing in Sweden in 2013 and currently owns 69 assets in the country. In January, the firm set up a joint venture with Swedish residential developer Oscar Properties to build Primus 1, a Stockholm residential development, in which Starwood owns a 70 percent stake, according to a statement at the time.
The company last executed a European take-private in 2014, a smaller deal that saw Starwood team up with M7 to buy Tamar European Industrial Fund for £53.5 million (€67.1 million; $90.8 million), PERE previously reported.
Starwood enters an “incredibly stable” Swedish private rented market, Amanda Welander, CBRE’s head of research in Sweden, told PERE. Because rent regulations loosened in 2006 and again in 2011, and the bond market saw poor returns, Swedish pensions began investing in the property type through large portfolios.
“Foreign investors have now picked up the pace, and have found that the easiest entry to market has been through the equity markets,” she said. “The changing legislation has provided an excellent opportunity to improve net operating income by upgrading the property stock, leaving room for growth for property companies with an active portfolio management strategy.”
Starwood peer Blackstone also bought into Swedish residential real estate through the 2016 purchase of a 32 percent stake in D. Carnegie & Co, the largest listed Swedish residential real estate company. Welander highlighted favorable demographics as one catalyst to Blackstone and Starwood’s interest in the space, with the United Nations ranking both Stockholm and Gothenburg among the top 12 fastest-growing European cities until 2025.
“Both D. Carnegie and Victoria Park are well known in the market for being innovative in carrying out renovations in a cost-effective manner, that still provide grounds for increasing the rents,” Welander said. Victoria Park “is not a one-off since there is already one previous deal. We believe the interest from international investors looking for stable risk-adjusted returns will continue, as Swedish households have an attractive purchasing power and the vacancy rates are very likely to remain low.”