NREP Funds Structure (2)

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NREP Funds

Nordic Real Estate Partners or NREP is a Nordic private equity firm that specializes in real estate investments, and that has so far established 11 funds. Present in Denmark, Sweden, Finland, Norway, and the United Kingdom, it has 13 general partners, 7 advisory board members, and over 200 support staff who are divided into nine teams. Its investors or limited partners are mostly insurance companies, pension funds, sovereign wealth funds, and other blue chip institutions.

Operating Structure

  • Nordic Real Estate Partners or NREP is a Denmark-based private equity firm that focuses on the real estate industry. NREP’s LinkedIn profile indicates it has more than 200 employees.
  • NREP has 13 partners and 7 advisory board members. Of NREP’s 13 partners, 6 are in Denmark, 3 are in Finland, 1 is in Norway, 2 are in Sweden, and 1 is in the United Kingdom.
  • The rest of NREP’s employees, spread across Denmark, Finland, Norway, and Sweden, are split into the following nine teams that provide support services: asset management; business development and investor relations; business and project development; corporate strategy; finance, reporting, and group functions; human resources; transactions; Logicenters; and NOLi Studios.
  • Logicenters is a company that offers modern logistics properties in the Nordic region, while NOLi Studios is a company that offers non-traditional rental apartments.
  • Additional specialities include communications, group controlling, group support, legal, information technology, and retail.
  • The partners at a private equity firm are general partners whose responsibilities include the management of the fund, the selection of investments to be included in the portfolio, and the securing of capital commitments from limited partners.
  • They coordinate with the rest of the employees, who provide support and research services, and the members of the advisory board, who lend credibility, offer industry expertise, and help with finding investors and sourcing transactions.

Funds

  • A private equity firm raises funds and uses the money in these funds to create favorable returns for investors. According to private equity funds marketplace Palico, NREP has so far closed and liquidated the following funds: NREP C-1 (2005), Pelican Self Storage (2009), NREP Retail 1 (2009), NREP Logistics AB (2010), NREP Development Fund 1 (2011), NREP Nordic Retail Fund 2 (2012), NREP Development Fund II (2013), Nordic Strategies Fund (2014), and Nordic Strategies Fund II (2016).
  • The size of the most recently closed fund, Nordic Strategies Fund II, was EUR 1.7 billion.
  • After Nordic Strategies Fund II, two new funds were established. The €1.1-billion NREP Logistics Property Fund was announced in April 2017, while the €900-million NREP Nordic Strategies Fund III was announced in May 2018.
  • NREP has around €5 billion worth of assets under management.

Investors

  • Investors or limited partners enter into a Limited Partnership Agreement (LPA) with the private equity firm. Limited partners have limited liability and no control over investment selection. That is, they have no part in the selection of companies to be included in the portfolio.
  • NREP’s investors or limited partners appear to be insurance companies, pension funds, sovereign wealth funds, and other blue chip institutions that are based in the Nordic region, Europe, United States, and East Asia.
  • The investors in NREP’s latest fund, NREP Nordic Strategies Fund III, were insurance companies, pension funds, sovereign wealth funds from the Nordic region, Europe, United States, and East Asia.
  • They invested in this fund as a result of their interest in underserved segments of the real estate industry in the Nordic region. Underserved segments include student housing, rental apartments for low-income and middle-income households, flexible living options for young professionals, care homes, active senior co-living spaces, modern logistics, and community retail centers.
  • Despite investor interest totaling €2.3 billion, the size of the fund was capped at €900 million. NREP set this cap due to operational capacity constraints.
  • The investors in NREP Logistics Property Fund include AP1, DIP, JØP, Lægernes Pension, which are all local pension funds, and Allianz and Helaba Invest, which are international institutional investors.
  • According to AP1, one of the investors, they view their investment in the fund as their way of capitalizing on future consumption, e-commerce, global trade, and supply chain configuration.
  • Institutions that invested in NREP Nordic Strategies Fund II were mostly blue chip institutions from the Nordic region, Europe, and the United States. Most of them were investors of the preceding fund, Nordic Strategies Fund.

Revenue Sources

  • NREP has not disclosed the management and performance fees it charges, and how it makes money, but private equity firms typically earn money by charging an annual management fee of 2% and a performance fee of 20%. The performance fee is a percentage of the fund’s excess gross profits.
  • A private equity fund typically has a duration of 10 years and goes through the following stages: fund organization and formation, fundraising, deal sourcing and investing, portfolio management, and exiting from investments.
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