NREP closes €1.9bn for fourth Nordics value-add fund

The Copenhagen-based manager says the fund, which is more than double the size of its predecessor, is the biggest Nordic-focused vehicle ever raised.

Nordic Real Estate Partners has closed the fourth fund in its value-add series on €1.7 billion, PERE has learned, surpassing its initial target of €1.25 billion. With €200 million of co-investment capital, the vehicle is near its €2 billion hard-cap.

The Copenhagen-based manager said Nordic Strategic Fund IV is the largest fund ever to focus solely on the Nordic region, which includes Sweden, Norway, Denmark and Finland. The fund is more than double its predecessor, NSF III, which closed on €900 million in 2018.

Nokkanen: investors see Nordics as a haven for capital

Jani Nokkanen, NREP’s chief investment officer, attributes the firm’s fundraising success to its experience in the relatively small but fast-growing region, and its focus on operationally intensive property types – such as student housing, senior care and flexible accommodations. He also noted a global flight to safety during covid-19 has benefited both NREP’s targeted asset types – residential and logistics, primarily – as well as the Nordics broadly, which have been less severely impacted by the pandemic than other prominent real estate markets.

“Different people see different positives, but what most are looking at is the stability of the system,” Nokkanen told PERE. “Of course, this is a health crisis and the Nordic healthcare system has shown its strength, even in Sweden. There is also economic stability and political stability in the region, which are appealing during these times, and it helps that at least half of the region is euro-based.”

Although northern European managers and strategies have been in vogue as of late – just this week Stockholm-based EQT closed a €1 billion pan-European fund that has largely focused on the Swedish market – Nokkanen said NREP is unique in its ability to deploy at scale in all four countries. Even well capitalized institutions have struggled to invest directly the region, he said.

“It’s difficult to get into the Finnish or Norwegian market as a direct investor,” he said. “If you’re looking for core investments, you have some people coming in directly, but for value-add and opportunistic investments, you need to go with the indirect funds.”

The New York State Common Retirement Fund was among the new investors to the series, committing €200 million to NSF IV in August. The Los Angeles City Employees’ Retirement System, Los Angeles Fire & Police Pension System and San Diego City Employees’ Retirement System have committed a combined $100 million to the fund, according to PERE data. NREP also secured commitments from Industriens Pension, which invests on behalf of Danish industrial workers, and Novo Holdings, the investment arm of the charitable organization Novo Nordisk Foundation.

Nokkanen said the NSF series has expanded its investor base with each successive fund, starting with local institutions and then gradually adding pensions from throughout Europe, the US and Asia-Pacific. NSF IV is its most globally diversified to date, he said.

Thus far, NREP has committed 40 percent of the fund’s capital, acquiring a dozen care homes, mostly in Sweden, as well as several residential properties, including a 108-unit property outside Stockholm and a 400-unit building in Copenhagen’s south harbor area. It also has several logistics assets throughout all four countries.