Nordic Real Estate Partners (NREP) today announced the first closing of NREP Nordic Retail Fund 2, which becomes the sixth NREP fund. The fund marks the continuation of NREP's retail value add strategy, with which NREP has delivered steady income and capital appreciation for the last seven years despite turbulent markets.
The first closing, which amounts to 121 million, consists of a group of nine Northern European institutional investors, among them JØP (The Pension Fund for Danish Lawyers and Economists), PBU (The Pension Fund of Early Childhood Teachers) and Talanx Group (German Insurance Group). In addition, NREP has co-invested as in all prior NREP funds.
"We are grateful that the investor community is starting to notice the attractive risk adjusted returns we have been able to produce with our focused value-add investment approach. We will do everything possible to ensure we keep living up to the trust investors are showing us," says Mikkel Bülow-Lehnsby, CEO, NREP.
NREP is expecting to deliver annual dividends of 7-10%, coupled with some capital appreciation driven by active asset management leading to an overall fund target IRR of 12-13%. This is achieved by acquiring well located food anchored retail assets in strong growing Nordic cities with an attractive demographic outlook. Many of these assets will benefit from active hands on asset management.
"Food-driven retail consumption in the Nordics is stable, which is why the risk-reward balance in our view is favorable provided that you focus on locations with the right demographics, and have the in-house skills to differentiate the good apples from the bad.
"In addition, we have historically been able to further enhance this risk-reward balance by working with our tenants to improve turnover and to improve tenant mix as well as the general property specifications. This has been possible as there are few focused owners in this segment in the Nordics," says Rasmus Nørgaard, CIO in NREP.
NREP expects the fund to have its second and final closing towards the end of the year, where NREP expects to reach the target of 200-250 million. This will leave the fund with a total investment capacity of 400-500 million given use of 50% leverage.