In late July, The Blackstone Group announced that it agreed to acquire a portfolio of Nordic properties for NOK 22 billion (€2.48 billion; $2.7 billion) as well as a 34 percent stake in subsidiaries of Norwegian investment management firm Agasti Holdings.
At the time of the announcement, James Seppala, head of European acquisitions at Blackstone, said the firm had a long-standing ambition to bolster its holdings in the Nordics.
But, Blackstone is not the only global private equity real estate fund manager to sense an opportunity in the region. At the very start of the year, Starwood Capital Group closed on the acquisition of two property portfolios in Sweden and Norway valued at €1.2 billion. The transaction included a portfolio of 106 properties totaling close to 11.8 million square feet, consisting mainly of offices and logistics and industrial assets, as well as hotel and retail properties.
And even outside of these enormous portfolio deals, there has been a lot of cross-border real estate investment into the Nordics this year.
In fact, to date, cross-border real estate investment into the Nordics is more than double what it was in 2013 and 2014 combined, and the highest it’s been since 2007, according to data from Real Capital Analytics. So far €9.3 billion has been invested in Nordic real estate from outside the region this year, whereas only €4.8 billion and €4 billion was invested in 2014 and 2013, respectively.
Not everyone will be pleased with the emergence of the big private equity real estate players, however. Speaking to PERE earlier this year, Mikkel Bulow-Lensby, the founder and chief executive of Nordic Real Estate Partners, a Denmark-based private equity real estate fund manager, said domestic players have a reason to be nervous.
“When you have the people on the ground that actually understand a particular segment you are focusing on, you feel you have an edge compared to the rest of the market. But, the worry I have is that capital which is much more financially orientated will come to the market and just pay something that we can’t,” said Bulow-Lensby, whose firm closed on its hard cap of €400 million earlier this year for its value-added NREP Nordic Strategies Fund, after launching it only last year with an initial target of €325 million. “The combination of the debt and equity markets can create a fear for us.”
For Bulow-Lensby and his firm, the fear can also come from non-traditional real estate investors. He said that hedge funds have invested in Denmark because they think the currency is going to increase, and think real estate is the best way to get access to the opportunity.
“We have the luxury to not consider whether or not we think it is attractive to invest in the Nordics, we only have to consider how to make the best possible investments in the Nordics,” he added. “Even with that luxury we still have to consider that there will be all this money coming into Denmark because of the currency situation.”
However, the emergence of big check writers in the region is not all bad news for smaller private equity real estate managers in the Nordics. Back in May, NREP struck the largest portfolio sale of prime logistics properties in the region and the largest exit by the firm since it was founded 10 years ago.
The firm sold for approximately €650 million all the underlying assets in its NREP Logistics Fund and three properties from its C1 Fund. And although the buyer was a consortium of four Danish pension funds, bidders came from a wide variety of capital sources, including sovereign wealth funds and even opportunistic funds.
So despite already blowing past the previous year’s investment volumes, the Nordic region looks set to continue attracting interest from the largest pools of capital from across the globe.