Tightening yields in the Nordic region during the first half of 2007 stimulated Northern European Properties (NEPR) to reduce its holdings there and invest in Baltic Russia. The Jersey-registered real estate investment company has announced the acquisition of six properties in Russia for EUR 231 mln and the sale of 11 assets in Sweden and Finland for EUR 233 mln.

Tightening yields in the Nordic region during the first half of 2007 stimulated Northern European Properties (NEPR) to reduce its holdings there and invest in Baltic Russia. The Jersey-registered real estate investment company has announced the acquisition of six properties in Russia for EUR 231 mln and the sale of 11 assets in Sweden and Finland for EUR 233 mln.

NEPR said legally binding agreements have been signed for the Russian acquisitions and the transactions are to close by the end of August. Two of the acquired properties, with a total lettable area of 25,000 m2, are fully let office properties in St Petersburg. The average stabilised yield on the purchase price is 10%. Two fully-let shopping centres in Kaliningrad and Murmansk, and a office building connected to the Kaliningrad mall. The average stabilised yield on the purchase price is 10.5%.

The last two properties are a 278-room hotel and a retail DIY store in St Petersburg. The assets were acquired from London & Regional Group for a combined purchase price of about EUR 82 mln. The definitive purchase price is to be determined by a market valuation currently being performed by an external valuation company. NEPR said these properties are leased to strong western tenants, Sokos and Kesco, on long leases of 15 years and 10 years respectively. The average stabilised yield on the purchase price is 9%.

NEPR said the disposals related to a portfolio of seven office and industrial properties located in Finland, the largest of which is an office building leased to Nokia, and four offices in Stockholm. The sale price of the Finnish office and industrial portfolio came to EUR 187 mln, representing a yield of 5.7%. The sale price of the Swedish office properties is EUR 46 mln, representing a yield of 4.9%.

The total sale price reflects a 13% uplift on the external valuation by DTZ contained in the prospectus for the initial public offering that raised EUR 350 mln on the Alternative Investment Market (AIM) of London Stock Exchange in November 2006.

'The first half of 2007 has continued to see a tightening of yields in the Nordic region reflecting continued investor demand and strong rental growth expectations. Whilst the Investment Manager believes that there remain attractive opportunities in the Nordic region, further yield compression may be difficult to achieve in some areas. The disposals reflect the Company's objective of optimising the value of its existing portfolio where significant uplift has been achieved and recycling the capital in areas where it believes more significant value can be created, 'the company said in its statement.

At the time of its IPO, NEPR said it intended to acquire investment assets in the Nordic, Baltic and Baltic Russia (St Petersburg and environs) regions.