The Swedish real estate market is often dismissed as a 'closed shop' due to the dominance of local institutional investors. But there is room for cross-border players, PropertyEU's latest Nordic investment briefing has heard.
The Swedish real estate market is often dismissed as a 'closed shop' due to the dominance of local institutional investors. But there is room for cross-border players, PropertyEU's latest Nordic investment briefing has heard.
Panellist Peter Lilja, director of Situs Nordic Services, told the briefing that international investors are focusing on the other Nordic countries. 'The problem right now is that Sweden is almost fully dominated by local investors,' he said. 'There have been a lot of IPOs and there is easier access to bank financing and through the bond market. Swedish real estate companies have access to unsecured bonds for three, five and seven years so there is a lot of liquidity there.'
It is very difficult for international investors to access core office properties in the CBDs of Stockholm and Gothenburg, fellow panellist Patrik Kallenvret, managing director of CBRE Sweden, said. 'In order to invest in these types of CBDs international investors need to get down to a lower yield than the market yield.'
But historically international investors, Kallenvret said, have been really strong in the retail property and logistics segments. 'They still are really strong in these segments and there is big demand for such product.' Portfolio acquisitions are another area where large cross-border investors can compete.
DOMESTIC PLAYERS GO INTERNATIONAL
And, the balance of power many even be shifting in the core office markets, according to Pertti Vanhanen, group head of property at Aberdeen Asset Management. 'People are always talking about the size of the Nordics and the domination of the local institutions,' he said. 'The local institutions have recognised in the last five years that their domestic, direct real estate allocation is too high and they are beginning to invest more outside their home countries.'
Vanhanen said that this trend has manifested itself both in Sweden and among the largest pension funds in Norway, Denmark and Finland. 'I think this opens nice opportunities as the institutions are the dominant players who own the type of core assets that international investors want.'
A number of international investors have been active in the Nordics for 10-15 years and more are arriving daily, the briefing heard. The bulk is Anglo-Saxon money. In one notable deal last year, Canadian pension investor CPPIB took a 50% slice of Stockholm's Kista mall alongside Finnish listed company Citycon in a €530 mln deal. In another, US private equity group Starwood entered the arena by partnering with local investor and asset manager Vencom to acquire a 205,000 m2 retail package in Sweden from KF Fastigheter. The two partners paid SEK 3.9 bn (€435 mln) for the assets, which include seven retail schemes in a number of Swedish cities.
CBRE worked on the Starwood deal which was one of the first large direct investments by a US investor in the region since the crisis. Helaba and Aareal Bank €280 mln provided in debt financing for the acquisition.
And there is more to come, according to Helaba's Thomas Volker, as the Nordic region is now regarded by many investors as core, similar to the UK, France, Germany and Poland. 'Blackstone is opening an office in Copenhagen very soon, and that is a clear signal that the Nordics is core for these types of investors,' he said.
Investors from Asia are also looking at the Nordics but the flow of Asian money remains small compared to the region's presence in London. 'Some of my colleagues at CBRE have been in a helicopter showing Japanese investors around Stockholm,' he added.