Foreign investors snap up property

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Drawn by a much weaker krone and a strong real estate market, foreign investors bought up around NOK 50 billion (nearly USD 6 billion) worth of commercial property in Norway last year. Newspaper Dagens Næringsliv (DN) reports that Norwegian sellers were left with “enormous” gains on the sales of their assets.

The Solsiden shopping and office complex in Trondheim was part of the biggest real estate deal last year when Sektor of Norway sold its portfolio of commercial real estate to Citycon of Finland. Part of a major shipyard redevelopment, it's been called Trondheim's version of Oslo's Aker Brygge. PHOTO: Citycon

The Solsiden shopping and office complex in Trondheim was part of the biggest real estate deal last year when Sektor Gruppen of Norway sold its portfolio of commercial real estate to Citycon of Finland. Part of a major shipyard redevelopment, it’s been called Trondheim’s version of Oslo’s Aker Brygge. PHOTO: Citycon

While DN reported over the weekend that stocklisted companies are having a hard time attracting capital so far this year, it’s been flowing into Norwegian business property, not least from abroad. Over the last 10 years, nearly USD 100 billion worth of real estate has been sold to foreign investors, half of it last year alone.

The investors, many from the US and other European countries, are also attracted by low interest rates and a still-solid Norwegian economy despite the recent downturn that’s resulted from the steep decline in oil prices. “The low interest rates mean many investors want to place their money in commercial real estate, which they view as a secure investment,” Gunnar Selbyg, director of analysis and property valuation at DNB Næringsmegling, told DN. His employer is the commercial real estate division of Norway’s largest bank, DNB.

Norway ‘stable’
Selbyg said Norway is also still regarded as “stable,” with strong prospects for population growth and potential for more use of oil revenues. Relative returns on commercial real estate are also higher when interest rates are low, he noted, and Norway’s weaker krone gives foreign investors much more purchasing power. At current exchange rates, just one US dollar can be converted into around NOK 8.50, much more than just a year ago.

DN reported that last year also marked a record year measured in terms of transactions in the commercial real estate market. Strong international interest meant that sellers needed to evaluate selling, given the demand for their property.

“It led to many properties that no one thought would be put up for sale nonetheless coming on the market,” Selbyg said. “Many sellers saw opportunities for huge gains.”

That applied to both companies and individuals, along with real estate syndicates set up before the finance crisis of 2008. Fully 29 deals last year were completed at prices of more than NOK 1 billion (USD 117 million). Twelve included large portfolios of properties that shifted owners. DNB Næringsmegling reported that 253 deal were closed at prices of NOK 50 million or more.

Slower in securities business
Some Norwegian investors who sold were left with lots of capital. The largest deal in Norway involved the sale of Sektor Gruppen’s 34 shopping centers in Norway from local investors Petter Stordalen, the Varner brothers and the Johannson retailing family to Citycon of Finland. It paid around NOK 12.3 billion for the commercial properties located around the country.

In the securities business, though, DN reported a “drought” in the Norwegian market. Bonds issued by companies traded on the Oslo Stock Exchange have only raised NOK 2.8 billion so far this year, down 60 percent from last year. “It’s terribly quiet,” Lars Kirkeby, analysis chief for credit at Nordea Markets told DN.

The fall in oil prices has hurt, after several companies in the oil and offshore sector have had trouble servicing their loans. Others, though, think the market is less uncertain than it was and that there’s work to do, for example around big deals lately such as the acquisition of Opera Software and a pending takeover of Amedia.

newsinenglish.no/Nina Berglund