Sweden’s real estate crisis is proving a boon for a fund that’s preparing to deploy more of its $1.9 billion cash balance snapping up properties from desperate landlords.
Nrep, a Nordic fund that’s part of the Urban Partners investment group, is looking to capitalize on heavily indebted firms such as Samhallsbyggnadsbolaget i Norden AB and Heimstaden Bostad AB as they race to divest properties they can no longer finance using expensive bond debt.
“There are some things around Sweden in the way it’s been financed and how the structure around the market looks that make the country quite compelling,” Urban Partners Chief Executive Officer Claus Mathisen, 51, said in an interview in Copenhagen.
Mathisen, whose fund’s three biggest deals accounted for 15% of the volume of commercial properties changing hands in Sweden this year, expects to see more transactions with real estate companies still struggling to refinance $25 billion of maturing bonds through 2025.
“The amount of inbound interest and dialogs has never been higher than it is now,” he said.
Nrep is planning to take advantage of a transaction market that has slowed considerably as sellers and buyers struggle to agree on prices. Only 64 billion Swedish kronor ($5.8 billion) of properties have traded hands so far in 2023 — that’s down nearly 60% compared to the same period last year.
“Investing when others are not able to — if you have conviction, courage and capacity — is a great time to act,” Mathisen said.
So far in Sweden this year, Nrep has bought two office properties in Stockholm from Fabege AB, a 51% stake in Klovern AB and a portfolio of care homes from Vectura Fastigheter AB, among other deals. While the assets had been tracked for a long time, Mathisen says that current market decisions made the deals “nice to pursue now.”
Nor do the group’s ambitions end there. In May, Urban Partners raised €3.65 billion for a fund targeting properties mainly in the Nordic region, taking its total assets under management to €20 billion. The investment vehicle is now at its “highest ever capacity” in terms of capital and people, according to Mathisen.
Nrep’s interest in the region forms part of a wider trend where well-capitalized institutional investors such as Brookfield Asset Management Ltd. are replacing listed property companies as buyers of assets. Sweden has seen an increase of capital inflows this year as foreign buyers stand for 30% of purchased deals but only 11% of the divestments, according to data from Colliers Research.
The inflows have come against a surprisingly resilient backdrop for commercial property prices in Sweden, despite higher interest rates and one of the world’s worst routs in home prices. However, analysts at Nordic Credit Ratings expect downward pressures to intensify as price expectations become increasingly aligned. It’s a view shared by Mathisen, who says sellers and buyers are now meeting at lower price levels.
“It’s completely a buyers’ market,” Mathisen said. “It’s going to wobble along, but we’re not investing to sell 12 months from now. Our current funds have five to 10 years left.”
Source : Bloomberg