Profi Real Estate, the Stockholm-based private equity real estate firm, is to include international investors for the first time in the fundraising for its value-add fund series, PERE can reveal. The target for the latest fund, Profi V, is SEK3 billion ($312 million; €282 million).
The firm, which has previously focused almost exclusively on raising capital locally, has raised five prior vehicles – although it has also raised a separate account for Partners Group, the private markets manager based in Zug, Switzerland. Its Profi IV fund attracted SEK2.2 billion, entirely from Nordic investors. It has completed too a domestic fundraising round of SEK1.2 billion for Profi V from prior investors.
Thomas Sipos, the manager’s chief executive officer, told PERE that Profi V would now be the first fund to be marketed to investors in the US and elsewhere in Europe. He said the groundwork for the marketing expansion started with Profi IV: “We were prepared to go abroad for fund IV. Luckily, we had strong demand from domestic investors at the time, so we did not have to launch internationally then.
“The whole business was entirely Swedish. Now, all of our documents have been translated into English.”
Following strong performances with its prior funds, and with Profi IV now more than 75 percent deployed, Sipos confirmed it was time for the company to step up to raising bigger funds, including capital from outside the region.
Across Profi’s series, the firm has generated a gross IRR of 24 percent and an equity multiple of 2x, in excess of typical target returns for value-add strategies. “Most of that has been realized returns,” Sipos said.
Much of these returns have come from its repositioning strategy in the greater Stockholm area and other emerging sub-markets, such as those of Gothenburg and Malmo. “We are looking at markets we think will grow faster than the market as a whole,” he said. “We are also sourcing undermanaged assets for repositioning.”
However, the stated targeted return for Profi V will be a more modest 13-14 percent net IRR. Investors engaging with the vehicle can expect to pay a management fee of 1.5 percent and carried interest beyond a hurdle rate of 8 percent, in a set-up including a 50:50 catch-up provision.
Profi’s fundraising, which is being assisted by placement agent Lazard, comes at a time of relative interest in niche private real estate managers in the Nordics. Last week, Nordika, another Stockholm-based private equity real estate firm, held a final closing at more than SEK 1 billion for its third fund, Nordika III Fastigheter, following a target-beating performance for its value-add fund series. So far, the firm has generated a gross IRR of 62 percent and a 3.7x equity multiple. Nordika’s investors comprise mainly corporate pension funds and insurers from northern Europe, the firm said in an announcement on the fundraising.
Generally speaking, private real estate fundraising for the Nordics has been a consistent affair, with more than $500 million raised for closed-end funds each year over the past decade. However, successful fundraises by the region’s biggest managers NREP and Niam have pushed totals beyond the $2.5 billion mark in two of the past three years.