Niam has closed on the largest Nordics-focused private real estate fund to date, amassing €1.1 billion of total equity, PERE has learned.
The Stockholm-based firm, which launched Niam Nordic VII in June 2018 with a target of €800 million, closed the fund at its hard-cap. Fund VII breaks the Nordics real estate fundraising record set by Denmark’s NREP with its Nordic Strategies Fund III, according to PERE data. That fund closed on €900 million in May 2018.
Fund VII is 38 percent larger than its predecessor, the €800 million Niam Nordic VI – a significant increase in size compared with the modest growth that occurred over the firm’s prior three opportunistic funds: the 2007-vintage €670 million Niam Nordic IV, the 2011-vintage €719 million Niam Nordic V and the 2015-vintage €800 million Niam Nordic VI.
Niam chief executive Fredrik Jonsson told PERE the firm has continued to increase its investor base and new investors, on average, have made larger commitments – typically €50 million or greater. The number of investors in Fund VII was 27, compared with 24 for Fund VI.
“Investors tend to want to go with existing relationships and increase their commitments to existing relationships,” he said. “This is in the context of real estate allocations growing overall and this is also in the context of investment mandates growing. Also, there are still plenty of new investors coming into real estate seeking alternatives to fixed income.”
Investors in Fund VII include the New York State Common Retirement Fund, San Francisco Employees’ Retirement System and University of Michigan, all of which are returning investors. Approximately 75 percent of the equity raised came from existing investors.
Pension plans accounted for 60 percent of the capital raised, while sovereign wealth funds, endowments, foundations, fund of funds, endowments, high-net-worth individuals and insurance companies rounded out the remainder. Geographically, the equity committed was 67 percent from North America, 25 percent from Asia and 8 percent from Europe.
Niam pursues investments in Sweden, Norway, Denmark and Finland, and is diversified across property types, including residential, office, industrial, hotels and retail. The firm targets 18-20 percent gross returns and approximately 15 percent net returns for its opportunistic funds. On its website, Niam is reporting net returns and multiples of 18 percent and 1.8x for Fund VI, 12 percent and 1.5x for Fund V, 17 percent and 1.7x for Fund IV and 17 percent and 1.5x for Fund III.
“It’s more important pick right asset than pick the right market,” Jonsson said. “We always look for alpha ahead of beta.”
The firm is also looking at opportunities in emerging real estate sectors, although Jonsson declined to elaborate, as the firm was still in the early stages of those initiatives. “We try to be the first mover in those markets where we see room for institutionalization,” he said. “We’ve seeded some portfolios that we expect and believe we will be able to create out of pieces of real estate that individually aren’t institutionally attractive but collectively – if well assembled and managed – can be.”
In addition to its opportunistic funds, Niam has also raised and managed two core-plus real estate funds, Niam Nordic Core-Plus I and Niam Nordic Core-Plus II. The firm is targeting a 8-10 percent net return for those vehicles.