Partners Group buys €300m tail-end Nordic RE portfolio

Partners has acquired 4m square feet of property in Finland and Sweden by buying out the investors of Niam’s 2004-vintage Nordic Fund III.

Partners Group has bought out the investors of a real estate opportunity fund managed by the biggest private equity real estate firm in the Nordic region.

Partners has bought the units of Stockholm-based Niam’s Nordic Fund III, an opportunity fund which closed in 2004 with €320 million of equity commitments and which, at its highest value, contained properties valued at €1.25 billion.

Deep into its divestment phase and with its return targets already reached, Niam and its investors agreed to sell the fund’s remaining assets to Partners at a discount to their net asset value of €300 million. The extent of the discount was not disclosed.

The assets include three portfolios of retail and office properties in Sweden and Finland comprising 4 million square feet of letting space.

Following the sale, Partners and Niam formed a joint venture vehicle to hold the assets for a strategy aimed at unlocking further value from them over the coming three to five years.

Given Niam has conducted significant asset management work on the properties already, the return expectation for the new vehicle is comparably lower than the expectation was for the fund. Indeed, while the fund returned an 18 percent net IRR and a 1.6x equity multiple, the follow-on vehicle will be expected to generate more of a value-added return, in the low- to mid-teen IRR range.

Fabian Neuenschwander, a vice president in Partners’ real estate secondaries team, told sister publication PERE: “This was really a holistic solution. Investors were happy as in one go they were able to get liquidity. And now we’ve set up a new structure with Niam where we have provided them with a new incentive scheme, typical for a new fund. Decision making going forward will be jointly undertaken although Niam will be responsible for managing the portfolio on a day to day basis.”

Neuenschwander added that Partners was seeing an uptick in such transactions where the divestment period of a successful fund is coming to an end yet there is further value to be extracted from unsold assets. “That is a motivator for GPs to do this kind of deal with us,” he said.

“It’s a global thing and I wouldn’t say it relates to a specific strategy either,” he added.

Johan Bergman, chief executive officer of Niam, said the exit was nonetheless a “fair deal”.

“We got a good price so therefore we sold. You can have all kinds of views on future value and how you should reach it. We wouldn’t have sold unless we thought it was a good deal for the investors and we did. Partners Group wouldn’t have bought it unless they thought it was a good deal for the next three to five years. Indeed, that may well be the case.”