An Austrian asset manager has a created a US real estate investment trust (REIT) to target office and industrial property in the increasingly competitve Nordic region.
Nordic Realty Trust this week filed a registration statement for an initial public offering, seeking to raise $75m (€68.7m) for the strategy.
The move highlights the attractiveness of property in the economically robust Nordic region, where transaction volumes reached a record high last year, surpassing those of 2006 and 2007, according to data from Pangea Property Partners.
Nordic Realty is aiming to raise capital from both US and non-US investors through an innovative Luxembourg-domiciled ‘operating partnership’.
In its registration statement, Nordic Realty said spreads between cap rates on prime Nordic property and 10-year Norwegian, Swedish and Danish government bonds remained close to historical highs, ranging from 250bps to 400bps.
Nordic Realty said these levels suggest “the potential for near-term price appreciation across the sector”. The company claimed its “ability to source off-market or lightly-marketed deals” means it should be able target spreads closer to 400bps.
The REIT is sponsored by Vienna-based C-QUADRAT, an investment management firm with $6bn under management as of September 2015.
C-QUADRAT and Nordic Realty declined to comment while the offering was being marketed.
In the registration statement, Nordic Realty said the REIT status would give it an edge in an increasingly competitive market. “Within the Nordic market, we will be unique by virtue of our corporate governance profile and our structure as a US-listed REIT.”
The company says the setup is also attractive to non-US investors that want to avoid the US tax exposure that comes with REIT ownership.
An entity that passes income from a corporation to its investors cannot qualify as a REIT, but one that passes income from a partnership can. For this reason, Nordic Realty will conduct investments through a Luxembourg partnership structure, which, it is hoped, will not be treated by US regulators as a corporation.
The new company is led by Bjarne Eggesbø, who until January 2015 served as CEO and CIO of Norway-based Obligo Investment Management.
Competition for Nordic property has been heating up. Last July, affiliates of Blackstone Real Estate Partners Europe IV bought 10 portfolios managed by Obligo, a unit of Oslo-based Agasti Holding. Blackstone also took a 34% stake in the operational businesses of Agasti, which included Agasti’s entire operational business in Norway and Sweden. The deal gave Blackstone a portfolio of properties in a new market for its EU industrial and logistics platform, and local expertise in a competitive region.
Kiran Raichura, property economist at Capital Economics, told IPE Real Estate at the time of the Blackstone transaction that the deal illustrated significant demand, particularly from North America, for large portfolio deals in the Nordics. “Investors are increasingly confident in the outlook for higher-yielding property in the Nordic region and are keen to put large chunks of capital to work in these fundamentally sound markets,” Raichura said.
Last week, Capital Economics said it expected activity to “remain strong in 2016, leading to further property yield falls”.
Nordic Realty is pursuing acquisitions in excess of $620m. It has issued non-binding letters of intent on six properties in Norway totaling $162m and has made a conditional offer to acquire 16 properties in Norway, Sweden, Denmark for $205m. Nordic Realty has also entered preliminary discussions and started due diligence on 11 office and industrial buildings with an aggregate value of approximately $255m.
In the near-term, Nordic Realty said it intends to acquire properties using the net proceeds from its IPO, as well as mortgage debt.