Nrep, the Copenhagen-based private equity real estate firm, has added another closing to its core-plus Nordics real estate fund and expects more fundraising to happen by the end of the year, PERE can reveal.

The firm, the original and largest of cities-focused business Urban Partners, has held a third closing on €263 million for its open-end Nrep Income+ fund, bringing the vehicle’s total capital to €1.85 billion. The raising, to be announced formerly this week, is expected to be followed by another fundraise by the start of 2024 which would see the fund pass the €2 billion mark.

Formed in 2020, Nrep Income+ is targeted at income-generating real estate across the Nordic countries, principally logistics, rental residential and care home assets. It is the largest Nordic-focused core-plus fund in the market.

The vehicle currently comprises approximately 100 assets across 36 transactions. The latest capital raised is expected to be deployed into a pipeline of further deals valued at about €380 million, the firm said. Assets included in the fund’s investment brief are intended to honor parent company Urban Partners’ core beliefs around sustainability; Nrep has a target to become carbon neutral by 2028, a notably earlier timeframe compared to many other managers in the private real estate sector.

The fund’s original closing in 2021 was on €900 million. That was followed by a second closing last year of approximately €600 million. Rune Kock, chief executive officer at Nrep, told PERE tougher capital market conditions and lower performance in the sector contributed to the smaller size of the third closing. But as markets adjust to new valuations, he also expects fundraising for the vehicle to improve, highlighting the additional fundraise window by year-end could bring the total closer to previous years.

Kock: fundraising slowdown should come to an end after adjusted valuations.

“Nrep’s funds are growing and our ambition level for this fund is higher than what is evident in the numbers right now,” said Kock. “There are headwinds right now and funds like Nrep Income+ need to absorb those headwinds to be attractive to investors. I think we’re there now with valuations trailing and markets adjusting to a new reality.”

As a consequence of its valuation adjustments, Nrep Income+ is generating a running yield of 4 percent, but its long-term net target is above 7 percent. Kock said the fund must be considered a long-term proposition for its investors, in keeping with the firm’s ambition to manage assets positioned for timeframes of 30 years or longer in line with its sustainability agenda.

Yet the smaller fundraise for Nrep Income+ strikes something of a contrast with Nrep’s flagship, value-add Nrep Strategic Fund series, which has attracted significant investor support of late, indicating the relative appetite among institutions keen to capitalize on a rare opportunistic buying window in a region known for its safe haven status.

Kock said: “Many investors in our value-add fund series see this is a great potential vintage. NSF V will be making investments in a market where there haven’t been many alternatives for sellers, so we have massing buying power. But fundamentally we don’t believe the Nordics as a safe haven is about to change, just that we’re starting to deal from a new equilibrium in terms of inflation and interest rates.

“We’re seeing this in both funds. If you are a listed or non-listed [company] needing to take exits to free up liquidity for the bank or other purposes, you’d start by looking at your driest assets as you’d see them as the most liquid. So, lots of opportunities for core and core-plus buyers.”

The Nrep Income+ fundraising comes hot on the heels of Nrep’s final closing of the fifth fund in its Nrep Strategic Fund series. In May, NSF V was closed on €3.65 billion, making it the biggest European value-add fund raised to date, as well as the biggest private real estate fund raised for Nordic investments and also a record for the firm.