The Swedish retail market has been dominated over the last few years by foreign investors, who have snapped up large portfolios.
Until recently the market had been very quiet despite a strong underlying economy and turnover in retail trade increasing 6.5% in 2007.
With the problems of the financial markets tightening the availability of debt, a number of deals stalled and little was coming to market. In the past year only two large retail portfolios have come to market, and only one has sold.
Norwegian-based property company Steen & Strøm was put up for sale by its owner, private investment company Canica, in January this year. Assets in the Nordic market, particularly in Norway, are known to move quickly. However it took six months before Steen & Strøm was sold to ABP Pension fund and Klépierre for €2.7bn last month. The portfolio includes landmark properties such as Fields in Copenhagen and Allum in Partille, Sweden.
Shopping centre portfolio
The sale of the company – which owns and manages 30 shopping centres in Norway, Sweden and Denmark, in addition to managing a portfolio of 12 shopping centres for Norwegian life group Storebrand and a portfolio of 14 for Danish life group Danica – was expected to fetch around €3.5bn. The deal reflected a net yield of 6.2% on existing properties (not including the development pipeline).
This was the largest deal in the region since UK investor Boultbee bought the CentrumKompaniet portfolio in May 2007, in what was believed to be the largest shopping centre deal in the country. The €1.13bn portfolio contained 10 centres and was bought at a 4.2% yield.
The other large asset put on the market this year was the Kista Galleria shopping centre in Stockholm, which was put up for sale in February by Swedish life insurer Lansforsakringar Liv and Norwegian insurance company Vital Eiendom.
The asset is being sold with the neighbouring office block, the 41,000m² Kista Qvadrat, all of which is let and was expected to sell for more than SKr5bn (€528m).
Less than a week after the centre was put up for sale, Unibail-Rodamco announced that it was building the first new shopping centre in Stockholm in over 25 years – a 100,000m² mall in Solna, not far from Kista Galleria. The prospect of a new centre so close may have put investors off. Bids were due on the centre in mid-March, but this deal has also yet to progress beyond that stage.
With the exception of Steen & Strom, all the deals that have taken place in the past 12 months were below €200m.
In the first half of 2008, transaction volumes totalled €445m, a sharp fall on the €1.299bn in the same period last year.
“There are still a lot of funds looking at Sweden, but not opportunity funds they can’t find any opportunities,” says Magnus Lange, head of Cushman & Wakefield in Sweden. “German open-ended funds are still active looking for core retail assets, but the number of buyers is smaller.”
He says that financing on these deals has reverted to traditional mortgage financing, and while debt is still available to those looking to buy, it is at a lower gearing.
Finland
Interest in the Finnish retail market has remained fairly strong in the past year, despite the limited availability of debt. It is the only Nordic country where first-half transaction volumes in 2008 actually exceeded those of 2007. In the first half of 2008 total transaction volumes were €624m compared with €413m in the same period last year.
Last September, Doughty Hanson exited the market by selling the Iso Omena shopping centre, the last in a portfolio of eight Finnish centres. It sold it for €329m to Citycon, which in February this year sold a 40% stake to GIC Real Estate for €131.6m.
However, the largest transaction in the past year was the sale of the Kamppi Shopping Centre in Helsinki, which Protego Real Estate Investors bought from Boultbee in April for €452.5m, reflecting a net initial yield of 4.5%.
Average yields on retail assets in Helsinki have moved from 4.5% in the first quarter of 2008 to 5% in the second quarter.
The Kamppi centre was recently expanded, by 4,000m², as was the Forum shopping centre by 5,000m². Retail vacancy in Helsinki has remained at around 2% for the past few years, but both of these extensions are fully let because of the strong demand for their locations.
