Investor stampede sees NREP’s latest fund twice oversubscribed– Exclusive

The Copenhagen-based private equity real estate firm finds itself turning away capital from a range of existing and new investors.

Nordics private equity real estate firm NREP has held a final closing for its latest value-add fund, NREP Nordic Strategies Fund III, at its hard cap of €900 million, PERE can reveal.

While the vehicle’s total equity allotment was taken by investors, it is understood the firm had interest for as much as €2.3 billion, more than 150 percent more capital, from a mixture of existing and new investors. Despite turning the money away, the closing still represents the biggest for a real estate fund solely focused on the Nordics region.

The final closing is the second higher risk and return vehicle in the market to close this month where the investor demand was far in excess of original expectations, demonstrating a growing imbalance between institutional demand for the asset class and available investment vehicles with demonstrable performance records. GreenOak Real Estate, the New York-based firm, held a final closing of $1.55 billion for its third US fund, after increasing its hard cap “several times”, PERE reported earlier this week.

32% IRR, 1.7x

Performance of NREP’s Fund II pan-Nordics value-add fund

The NREP closing is also demonstrative of strong demand for real estate in the perceived safe haven Nordics markets, which are widely considered to be less volatile than other European markets, and for alternative real estate asset classes, which NREP has a long-standing track record of pursuing. For the Nordic Strategies Fund series, and for prior funds, the firm has focused on alternative asset types including logistics, senior living, middle-income and student housing. While the fund only started to be invested this year, NREP is thought to have already deployed approximately 25 percent of the fund’s capital.

Historically, NREP’s investments have often produced above-target returns. Indeed, according to sources familiar with its vehicles, since inception in 2005, NREP has across all its investments generated IRRs in excess of 20 percent on average and a 1.8x equity multiple; for the first Nordic Strategies Fund, which attracted €400 million of equity in December 2014, the firm has produced a 32 percent gross IRR and 1.7x equity after exiting the majority of its investments. Fund II was closed on €600 million in November 2016 and is now fully invested.

Fund III is understood to have capital from a wider array of investors than before, with commitments from pension funds, insurers, sovereign wealth funds, foundations, funds of funds and family offices. In line with recent trends for capital flows, the fund also saw an increasing share of East Asia investors. The vehicle has a 10-year fund life with three one-year extension options.

NREP declined to comment.