Fredensborg, the parent of Sweden-based residential property firm Heimstaden, has established residential specialist manager Heim Global Investor, PERE can reveal.
The firm is expected to raise institutional capital for investment funds with residential strategies and is already out marketing its first vehicles.
Oslo-headquartered Heim Global Investor will operate as an independent manager alongside Heimstaden, which manages listed residential property platform Heimstaden Bostad and owns more than 160,000 homes across Northern Europe.
While Heimstaden has raised capital from institutional investors, it is a limited liability company operating as a corporate entity. Heim Global Investor, on the other hand, is an alternative investment fund manager regulated by the Financial Supervisory Authority of Norway.
Although both firms are focused on residential real estate, Heimstaden, through Heimstaden Bostad, invests primarily in stabilized assets with a core and core-plus return profile and with an evergreen holding horizon, whereas Heim will initially target a value-add return through the development of assets to sell within its closed-end funds.
Heim’s first two funds are Heim UK Residential Development Fund and Heim European Residential Development Fund. The first is a closed-end UK build-to-core vehicle, for which the firm is looking to raise £800 million ($1 billion; €934 million) and is planning a first close midway through the year, and the latter is a closed-end Northern Europe-focused development fund, for which €750 million is being sought and a first close planned for H2.
According to Andreas Oulie, Heim’s chief investment officer and former co-head of the investment team at Heim’s sponsor Fredensborg, it “made a lot of sense” to establish a regulated fund manager to expand the product range beyond what Heimstaden Bostad offers. Targeting returns higher up the risk spectrum “has been well received by our investors,” he added.
“It has been important for us that we build upon the success of Heimstaden and Heimstaden Bostad and the way they’ve been able to scale a leading platform across nine countries in Europe. We want to keep the investment product and the investment strategy and execution as close as possible to what we have historically done, without competing with the existing offering,” he explained.
According to Oulie, the firm is close to signing its first investment for the UK fund for which Heim will develop and then hold stabilized assets for up to five years. The firm also has an ambition over time to transition the assets into a continuation vehicle or platform for the fund’s investors to build up a long-term portfolio, he explained.
Heimstaden, through Heimstaden Bostad, entered the UK market in 2021 and has since invested in or developed more than 1,400 residential units in the country.
According to Oulie, Heim originally set out solely to raise the European residential development fund, which is focused on the geographies where Heimstaden already has a local investment team and track record – namely Sweden, Norway, Denmark, Germany, Netherlands, Czech Republic, Finland and Poland. “Then, based on specific investment demand from our investors for the UK, we decided to carve out the UK from the strategy and establish a purely UK focused strategy,” he said.
With the European fund, assets will be divested once stabilized. The firm will apply leverage of 50 percent to both funds’ investments.
“We will do late-stage development projects, meaning there is planning permission in place and we have a firm view of the timeline of projects,” he said of both funds. “Looking at the demand, investors recognize that as well: appetite for investing in early-stage development, where you have substantially higher risk, is lower than for more mature developments.”
Going forward, Heim could expand its investment remit into other subsectors of the residential asset class, such as student housing, or even into other types of real estate, said Oulie. “However, right now, we believe the best opportunities are within the living sector and we get that same feedback from the investors who we are in dialogue with,” he added, citing the acute undersupply of housing across the UK and Europe.
In addition to Oulie, Heim’s leadership team consists entirely of former Fredensborg executives, including Christian Birrell as head of UK investments and Nick Tollefsen as head of European investments. Heim shares investment committee members with Heimstaden.
Operations at affiliate Heimstaden have been under the spotlight since last year, when a lengthy period of negative cashflows and an overreliance on bond financing led ratings agency Fitch Ratings to put Heimstaden Bostad on negative rating watch in September. Last week, Fitch followed through and downgraded the landlord’s credit rating to BBB-, citing liquidity pressures, reduced interest coverage from rent growth lagging cost inflation and limited visibility on new equity for deleveraging.
A key reason for the latter factor, the report said, is ongoing investigations concerning the Swedish pension fund Alecta, which has owned a 38 percent stake in Heimstaden Bostad since it was established in 2013. Last September, Sweden’s financial regulator launched an investigation into Alecta’s investment into the company, seeking to verify regulatory compliance with regards to vigilance, governance and risk management.
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