The alternative to the PIIGS – the Nordic region appears to have survived the global financial crisis better than most other European countries. PERE Magazine July, August 2010 issue

Safe haven  

If you could play God for a day and create the perfect financial model of a country, what would you build in?

You would want to bless it with a plentiful source of sustainable wealth, right? Oil, let’s say. But you wouldn’t want to rely on petroleum alone, so you would give it a strong diversified export base, throwing in some high-tech green industry along the way.

Of course this country would need its own currency – you don’t want to share the denomination of your neighbours after all – and a growing population. When it comes to macro-economics, there’s really no substitute for positive demographics as a driver of real estate fundamentals. You’ll also be targeting near full employment, high productivity and, for those that are not economically active, ensure there’s a generous welfare safety net.

At the same time, inhabitants of this dream economy should be keen savers, but enjoy low interest rates to help them carry on consumer spending even during a severe global downturn.

Give it a highly-transparent property market, of course, and on the social side, insert a few anti-black market regulations, such as making prostitution illegal, topped off with an egalitarian education system.

Oh, and taxes. If you are a property investor, let’s create a country where there is zero tax on property transactions. That, of course, would be the icing on the cake – and for most people reading this feature, wishful thinking.

However, if you take the best parts of Sweden, Norway, Denmark and Finland (forget Iceland) and throw them together, this is exactly what you would have. It is exactly why the Nordic bloc is the antithesis of the PIIGS – Portugal, Italy, Ireland, Greece and Spain.

Sure, property values have tumbled in this region, just like everywhere else, rents and occupancy levels are under pressure and each country has some worrying indicators. In Sweden, for instance, unemployment has risen to 9.8 percent, according to Statistics Sweden.

Yet none of these countries have dramatic national budget deficit problems, such as those seen in the PIIGS and the UK, nor is any undergoing severe austerity drives, like in Germany. What better moment, then, to host our first ever PERE Nordic Real Estate Roundtable discussion to gather intelligence on this apparent financial haven.

Steady as she goes

On Monday June 7, PERE joined four real estate professionals in the Swedish capital city of Stockholm, commonly regarded as the epicenter of the Nordic region.

Among the four were Pertti Vanhanen, who for the past two years has been leading Aberdeen Asset Management’s €8.2 billion Nordic property business and is now head of direct property for the whole of Europe; Johan Bergman, managing director of Niam AB, a Stockholm-based private equity real estate opportunistic firm; Peter Helfrich, managing director of the Nordics at Dutch giant ING Real Estate Investment Management, which operates a semi-open-ended core, core-plus Nordic fund; and Klas Åkerbäck, real estate portfolio manager of the Swedish pension fund, AP Fonden 3, and the man in charge of the pension’s unlisted real estate investments.

The last nine months have been very positive even though values have gone down slightly because we have seen increased appetite from investors.    

Aberdeen’s Pertti Vanhanen

Though each individual has a different outlook on real estate, investment strategy and investor base, all our participants argue that interest in the Nordics has been rekindled thanks to the region’s relative stability.

“The last nine months have been very positive even though values have gone down slightly because we have seen increased appetite from investors,” Aberdeen’s Vanhanen says. He points out that Norway was the first to see that interest, adding that the county is one of only two in Europe without a budget deficit. The other is Switzerland.

ING’s Helfrich adds that ING’s Nordic property fund, established in 2005, is yet to suffer redemptions and draws attention to an article in the Financial Times in June describing exactly how Scandinavia was “quietly emerging” as Europe’s haven. The newspaper mentions how in company earnings, businesses from Sweden, Finland and Norway led the list of those that beat market expectations in the first quarter. Those from Portugal and Italy came in at the bottom.

Of course, it’s easy for one to generalise. After all, Sweden, Norway, Denmark and Finland all have their differences as countries.

Not homogenous

Sweden as an economy clearly has the most diverse export base. The country trades pulp, paper, industrials, cars, mining equipment and biotech products. For this reason, it is arguably the most dependent on the world around it. Niam’s Bergman says that Germany and Norway are Sweden’s biggest export markets and that Sweden suffered tremendously when production globally ground to a halt. Exports dropped 20 percent to 30 percent.

The good news is that exports are growing again, albeit from a low base. Indeed, Swedish finance minister Anders Borg said in May that the country now had the strongest growth of all the European Union countries. 

Norway itself is an oil economy and a member of the powerful OPEC. It is also heavily involved in fishing, the shipping industry and is a net producer of hydro power electricity.

In short, Norway has a less diversified export base than Sweden and has its weaknesses, but oil prices remain a strong economic driver. Thanks to oil, Norway’s government also controls the second largest sovereign wealth fund in the world behind Abu Dhabi.

“What you have to remember is that in Sweden and Finland the GDP per capita is $55,000 whereas in Norway it is more like $95,000. That is a big difference,” says Vanhanen.

Out of the four nations Finland has suffered the most as a result of the downturn, with its economy the most export driven and less diversified. With St. Petersburg just 380 kilometres from Helsinki, the country has also become somewhat dependent on the Russian economy.

Denmark, for its part, seems to be somewhere in between the other countries in terms of pain and recovery.


It is the idiosyncrasies of these countries that our four Roundtablers pick up on. With their on-the-ground knowledge, here are some things you may not find through any other real estate guide.

  • Local entrepreneurs – referred to as ‘leather jacket and Mercedes’ – are currently avid buyers of smaller properties in regional cities in Finland and Sweden.
  • In the central business districts of Stockholm and Helsinki, properties that were turned into offices at the peak of the market are being turned back into residential

  • House prices are actually rising in Sweden, Finland and Norway on the back of low mortgage interest rates, and in Sweden there is even talk of a bubble forming, promoting the national Riksbank to investigate   
  • It is possible to buy and sell commercial property in the Nordics with zero tax if you use appropriate special purpose vehicles
  • Russians have been buying up so much, including residential property, in the relatively safe haven of Finland, where they can get property rights, that the Finnish government is beginning to get concerned.


The positive macro and social economic factors experienced in the Nordics is, according to ING’s Helfrich, actually helping create liquidity in the property market. ING first entered the Nordics in 2005 when the region was of particular interest to foreign investors.

The Dutch firm deliberately avoided the Nordics as an investment region up until this point because of its relative small size and population. However, in reacting to investors, not least ING Insurance, it made sense to launch a fund. The firm's debut deal was a portfolio of hypermarkets across Sweden, acquired for €450 million. “The market was really hot. There were 40 bidders,” recalls Helfrich.

Though bidders for properties have not returned to anywhere near those kind of numbers, there are still more transactions today than during the past two years.

The Roundtablers remember the crazy years when US opportunity funds and others rolled into the region, buying up portfolios of properties and individual assets using cheap finance. Some fared better than others.

The Blackstone Group, for example, appeared to get its timing right and sold at the start of 2007, before the credit crunch contaminated the region. Goldman Sachs’ Whitehall Street funds also entered the market during the days of cheap debt. It struck a joint venture with Niam in Finland, which Niam and Whitehall still own and which is “going quite well”, according to Bergman.

But US opportunity funds are no longer active here – perhaps dealing with their own issues or looking elsewhere for opportunities. Maybe, offers Vanhanen, they are waiting for distressed portfolios to emerge or they feel they can get better deals elsewhere. The absence of US opportunity funds has therefore left the door open to local pension funds and financial institutions previously unable to buy property during the property bull-run.

We never press the stop button, so it is more a question of where to deploy capital rather than trying to beat a benchmark, 


Klas Åkerbäck, real estate portfolio manager of the Swedish pension fund, AP Fonden 3,

Constant dealing

Even given the fall in property values in the Nordic region, you’d be mistaken for thinking our participants had been quiet on the deal front.

AP3’s Åkerbäck says his pension fund never really stopped buying. It has an absolute return target. “We believe in time diversification,” he says. “We never press the stop button, so it is more a question of where to deploy capital rather than trying to beat a benchmark,” he explains.

From 2007 onwards, the pension fund was having a hard time understanding why it should buy office property, so it looked at different angles. Nevertheless, in their pursuit of absolute returns, the Swedish pension funds AP1, AP2, AP3, and AP4 did find deals.

In July 2008, AP Fastigheter – owned by the four AP pension funds – beat a consortium, reportedly led by Blackstone and Whitehall, to buy state-owned Swedish property company Vasakronan for SEK 41 billion (€4.3 billion; $5.2 billion). According to broker Catella Corporate Finance, the pension funds paid 10 percent or SEK5 billion less than the properties’ values in January 2008. AP3’s stake was worth around SEK 6.6 billion.

At the same time, AP3 looked abroad for returns, investing in third-party real estate fund managers, including in a fund manager owning German nursing homes and funds owning industrial property in Australia. The pension fund currently has interests in eight indirect real estate funds, including one geared towards secondaries trying to source deals from “over committed” institutions.

What Åkerbäck finds strange is that in 2007 AP3 was perceived by others in the market as having “conservative” leverage requirements but now “all of sudden people are pushing for zero”. His point is that if you want to buy a property with long-term tenants and good cash flow today, why not acquire a property with some debt?

ING, via its semi-open-ended core, core-plus Nordic Property Fund is in the process of buying a prime property in Finland that is being sold by an Icelandic bank. Though Helfrich declines to go into details, distressed sales of assets owned by collapsed Icelandic bank, Landsbanki, are beginning to happen.

Aberdeen began in the Nordics in the early part of the 2000s launching country-specific, mainly open-ended funds, as well as pan-Nordic funds. Of course, Aberdeen has not put anywhere near as much equity to work this year as it did in recent years.
Prior to the collapse of Lehman Brothers, Aberdeen was acquiring more than €1 billion of property annually. However, lately the firm has been buying properties in Sweden, Denmark and Norway for one fund, as well as acquiring a Finnish shopping centre and office/retail asset for two other funds.

Niam appears to have struck the biggest single deal in recent times out of the participants. Bergman explains his firm has been a very active buyer. In contrast to 2007, when the firm was a net seller of about €1.3 billion of assets, Niam has acquired about €2 billion of properties in the past six quarters alone. It is trying to be anti-cyclical, says Bergman. 

Niam's Bergman

In its latest deal – completed in April – Niam bought Norway’s third largest shopping centre manager and owner, Sektor EiendomsUtvikling, for SEK 6 billion, giving Niam ownership of 12 centres in the southern part of the country and management contracts for many others.

“Always the starting point is the macro view,” explains Bergman. “From the private consumer point of view the picture looks quite good as it does in the rest of the Nordics because people have money to spend. Norway is a rich country, and there is growing GDP on the back of oil and the country is doing well,” he

Drill down deeper into the deal, and those differences between the countries mentioned earlier by our participants rise to the fore. Bergman says some areas of Sweden are “probably oversupplied” with retail property, but planning permits are harder to come by in Norway, which protects existing shopping centres from competition nearby. This gives the Niam fund some protection for its acquisition in Norway. The portfolio offers some chance to add value via further development too.


Niam’s deal raises two interesting points for the Nordic region. One, that bank debt is available to trusted clients, although certainly not on the same terms as before. Two, that it isn’t necessarily distressed. Members of the family in question that sold the shopping centre company had a difference of opinion over future strategy.

This prompts debate about the sell-side of property. Our four Roundtablers argue that distressed deals have yet to materialise in any great quantity. “On the margin there have been some distressed deals but not on the level we expected post-Lehman,” says Bergman.

Bergman, Helfrich and Vanhanen agree that properties in Denmark owned by distressed Icelandic banks are still being held onto, but some portfolios in Sweden have been sold.

“That’s what was experienced in the last financial crisis in Sweden in the 1990s, and some of the assets will be good,” says Helfrich, referring to distressed sales. Between 1990 and 1993 Sweden was in a full-fledged depression. Housing prices fell by up to 25 percent, real GDP dropped 6 percent, with Swedish authorities quickly taking over and recapitalising insolvent banks. At the time, Helfich was a broker in Holland and seeing plenty of Swedish entities faced with dealing with toxic Dutch real estate assets on their balance sheet. In some cases, it took 10 years to resolve.

Not 1993

Conditions are very different in Sweden today compared to the early 1990s. For one thing, this time around rents were not over-inflated, ensuring values haven’t had to fall nearly so far.

That’s what was experienced in the last financial crisis in Sweden in the 1990s, and some of the as

sets will be good

Peter Helfrich, managing director of the Nordics at Dutch giant ING Real Estate Investment Management

At the time, two big commercial banks were also on the verge of collapse, according to Helfrich. Today the banks are more solid than many of their international counterparts, primarily because they avoided risky investments such as subprime US commercial-backed mortgage securities.

Swedes individually responded to the near death experience of 1993 and 1994 – when interest rates rose to around 14 percent – by learning the importance of saving money. The nation is now filled with savers, some would argue more so than Germany. As a result, Sweden has created a buffer against the downturn, with consumers able to carry on spending. Couple that saving power, with the fact many variable mortgage rates have fallen from an average of 4.5 percent two years ago to 0.9 percent today and Helfrich adds: “You can imagine what this has done for spending power.”

Companies are managing to carry on too. Undeniably, rents have fallen and occupancy levels are weakening, and there is always the risk that contagion from the weaker Euro economies could hit the Nordics further. Yet for Aberdeen’s Vanhanen: “Companies really believe in themselves more than they did 12 months ago. They are starting to make decisions. It is better than 12 months ago when everything stopped including imports and exports. That was like the ice age.”

And so, as PERE left Stockholm and the Nordics, the region does appears to be quietly emerging as a real estate safe haven.