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Denmark’s Novo Holdings becomes first platform investor in NREP

As a minority shareholder, the manager of the Novo Nordisk Foundation has agreed to commit more capital to the Copenhagen-based firm's real estate funds.

One of the world’s leading life science investors, Denmark’s Novo Nordisk Foundation has expanded its real assets exposure by backing NREP, the Copenhagen, Denmark-based private equity real estate firm.

Novo Holdings, the holding company that manages the foundation’s assets, has become a 25 percent minority shareholder in NREP. The transaction was signed on Friday and is expected to close in a month. In addition to becoming an entity-level investor, Novo Holdings will also increase its commitment to future real estate funds raised by the firm.

NREP did not disclose Novo Holdings’ exact commitment but PERE understands the total investment is a triple-digit million-dollar figure.

By year-end 2019, Novo Holdings was managing a portfolio of DKr127 billion ($19 billion; €17 billion), the majority of which was invested in public equity (52 percent), followed by private equity (18 percent). The investor’s exposure to real assets was 3 percent, according to its latest annual report. The investor also noted in the report that it plans to expand its presence within real assets, private equity and venture capital in the coming years.

Novo Holdings first invested in a NREP real estate fund in 2018. Through this latest partnership, Novo Holdings “expects to be able to contribute its financial expertise and international network to support NREP in the next stage of the growth journey,” said Morten Beck Jørgensen, the firm’s managing partner for financial investments, who also now joins NREP’s board of directors.

For NREP, this capital infusion is a step towards its goal of expanding its footprint beyond the Nordics and becoming, in the words of NREP’s partner and co-founder Mikkel Bülow-Lehnsby, “one of the most competent real estate investors in the world, not only by investing in assets, but by making real estate better.”

“We see real estate as the world’s largest product category but a product that surprisingly has not been customer centered, digitized and is not sustainable,” he told PERE. “There is a huge opportunity to make real estate better. And investing in building such skills requires a strong balance sheet. Growing all these new areas of competency is a long-term investment.”

Novo Holdings’ backing will not result in any change in NREP’s day-to-day management or investment committee.

PERE also understands a “vast majority” of Novo Holdings’ commitment will go into investing in NREP’s real estate funds. For example, Novo Holdings has invested €125 million in the firm’s latest vehicle, Nordic Strategies Fund IV, which is currently in market. According to PERE data, the firm is targeting €1.25 billion for the vehicle. By comparison, the investor earmarked €50 million for the €900 million Nordic Strategies Fund III.

“By getting in a balance sheet investor, we can not only invest in building more skills, but invest more in our funds. We are also able to offer more of our employees to invest more in our funds. That is part of the logic,” Bülow-Lehnsby said.