Rolf Nordstrom, a Swede, and Aubrey Glaser, a South African, have designs on the UK property market.Alex Catalano reports on their progress so far.
Rolf Nordstrom and Aubrey Glaser are planning to invest in UK property. Their vehicle is Prior, where Nordstrom bought out chairman James Prior’s 27% stake last May for £2.9m and moved into the boardroom with Glaser as managing director.
But Prior is only one arm of the European property business which Nordstrom, a London-based Swede, is assembling.
Nordstrom has spent the past decade investing privately in the UK, Germany and the Benelux countries. He now has a public vehicle, Fermenta, in Sweden – a company with what is politely called a chequered history, all pre-Nordstrom.
In the 1980s it rocketed to become a £1bn pharmaceuticals concern. After various bankruptcies, ownerships and lawsuits, however, it had by 1995 shrunk to £20m. Nordstrom then bought control and started turning Fermenta into an international property group (see below).
Nordstrom and Glaser have spent the past eight months restructuring Prior. They have sold both its debt collection service and a joint venture in Ireland, rearranged its financing and sold a property. They are now looking to rationalise Prior’s portfolio further.
The board has been beefed up with the appointment of three non-executives: John Lamb; Martin Gilbert, the head of Abtrust; and Michael Bell, chairman of Century Life.
Nordstrom and Glaser now plan to expand Prior, mainly through corporate activity. “We are actively looking, seeking, talking to some parties about acquisitions,” says Nordstrom.
So far they have not found the right situation, but discussions have been exciting. Glaser adds: “Some of them may be quite substantial. I think the market might be quite surprised at the size of what we are entertaining.”
The two directors also see future work for Prior in helping Swedish banks with workouts and joint ventures – for which Fermenta could provide backing.
Nordstrom’s biggest deal as a private player was the Makado shopping centre outside Maastricht in Holland. He bought it in partnership, with plans to extend it. Planning permission and tenants were lined up and the property was sold on.
“That’s the way I like to operate,” says Nordstrom. “It’s not purely just to buy an investment, sit down and wait for the yields to come down or the rents to go up. I want to be actively involved in the properties, to find the angle on how to improve them.
“What I really like about real estate is that you can actually influence what is going to happen with your investment.”
Nordstrom adds: “By being perhaps a bit more creative or ambitious than the previous owner, and by using your intelligence and by actually working with the property, you can create something.”
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Nordstrom is planning to make Fermenta into a holding company, operating internationally through stakes in quoted property vehicles. After acquiring the company, he bought 1,108,000m2 (11,920,000 sq ft) of high-yielding residential property in southern Sweden. Then, last year, Nordstrom snapped up 44% of Swedish property company Realia. “Realia was down on its knees, and we were invited by a major bank to take control,” says Nordstrom. After restructuring Realia, Nordstrom last month bought a 74,000m2 (796,000 sq ft) portfolio of offices and residential. Nordstrom points out: “Today Realia has a property portfolio in excess of £200m, and 430,000m2 (4.63m sq ft) of lettable space. We have today a very healthy positive cash-flow.” After acquiring Realia, Nordstrom bought Prior. A relative tiddler with a market value of £6m, the company had been in the doldrums virtually since its launch. It had come to the market in 1989, when James Prior reversed his private holdings into Knobs & Knockers. But the market crashed, hitting Knobs & Knockers badly. By the time Prior sold control to Nordstrom last May, the company owned 12 properties, scattered from Liverpool to Folkestone and Penzance to Hull, producing £3.1m rent on an annualised basis at the end of March 1996. A review by the new management wrote the portfolio down from £23.4m to £21.8m. The latest interim earnings for 1996 were £338,000 on turnover of £1.55m, but there were one-off restructuring costs during that period. Says Nordstrom: “We looked at a few situations, and Prior was the cleanest we could find. It has a well-balanced, interesting property portfolio. “It has adequate, even low gearing, its got good earnings, an up-and running organisation with relatively few employees. So we saw it as quite a perfect company to use as a platform for our UK expansion.” The Benelux activities have just taken off, with Fermenta’s £30m purchase of the Manhattan Centre. This 55,000m2 (592,034 sq ft) office tower in the Espace Nord of Brussels includes a podium with 12,800m2 (137,800 sq ft) of shopping. Nordstrom and Glaser have been negotiating the deal since last year. “It is a bit like having a baby – nine months,” notes Nordstrom. |
| Fermenta Group: Combined Portfolio | |||
|---|---|---|---|
| Gross assets (£m) | Gross rent (£m) | Gross area (000m2) | |
| Fermenta | 26 | 6.5 | 110 |
| Realia | 215 | 30 | 430 |
| Prior | 22 | 3 | 20 |
| Group total | 263 | 39.5 | 560 |
Aubrey glaser
When people ask Aubrey Glaser why he left California for the UK, he tells them: “the weather”. In the late 1970s, the29-year-old Glaser left his native South Africa for California, where he started a development business. Projects got bigger – culminating with a large office building backed financially by Peanuts cartoonist Charles Schultz. The project was finished and sold in 1988.
“It wasn’t clear the market was going to go down, but I took a breather,” says Glaser. The breather did not last long, however. Two of Glaser’s bankers had bought in estate agents Kennedy Wilson. They persuaded Glaser to join as a partner, providing the property expertise. Soon after, the US savings and loans institutions collapsed, and KW became a front-line auctioneer of repossessed properties. What Glaser had envisaged as a “fairly innocuous” tenure at the one-office KW grew to a full-time job in a nationwide group employing 500.
But Glaser also wanted to live in London and, in 1992, he set up one of KW’s European offices in the city.
Soon after, Glaser met Nordstrom. “I learnt of Rolf’s interest in Fermenta, of his plans,” says Glaser. “And when it came to the beginning of 1996, when Rolf was now ready to launch in the real estate world, we chatted about the prospects of doing this together.
“I was, quite frankly, itching to get back into the other side of real estate, the tangible side. No disrespect to the brokerage community – because I was there seven years – but I wanted to be more involved at the front end of it.”
Rolf nordstrom
Rolf Nordstrom, a 42-year-old Swede, came to the UK in 1985. An MBA, he had won the title of being Sweden’s youngest managing director when, at 25, he ran a small listed securities trading house.
But in 1980 Nordstrom sold out and moved into real estate. “The market was really at a very low point, so I though it was an advantageous time to enter.
“I built up a couple of portfolios in the southern part of Sweden, and got a very attractive offer in the mid-1980s, which I accepted.”
This, he ruefully confesses, was not the wisest move. “They must have doubled in value between 1985 and 1989, when they eventually peaked out,” he recalls. One of his reasons for cashing in was that he wanted to live in England.
“That was top of my agenda and, in the mid-1980s, I was then 30, we had just one child, he was one year old. So I said to my wife, this is the perfect opportunity, we won’t get it again.”
Nordstrom planned to start afresh in real estate, outside the draconian restrictions of Swedish exchange controls. He invested privately in Germany, Holland, Belgium, Luxembourg and the UK.
“When I entered those markets they were at a very advantageous price level. My first couple of deals in Holland were producing a 12-15% initial yield.”
They peaked out at 5-6% in1989-90, when Nordstrom sold up – often to less canny fellow countrymen.
Thanks to selling a couple of major properties at the time, Nordstrom did not suffer as much as other Swedes when the European marketsnose-dived. And the few investments he still held were high yielders. “That meant I could survive the initial crisis quite comfortably,” he says.
Nordstrom’s UK holdings were modest – “about 15 properties: the biggest one was £3m, I think.”
He collected office buildings with shops mixed in – the typical continental building. Nordstrom explains: “I quite like the idea of mixed property because I can see there are more angles to it.”
During the crisis, Nordstrom traded and helped Swedish banks with their work-outs in the Benelux countries. By 1994, however, he judged it was time to start investing again.
He and his bankers agreed it would be best to operate through a listed company, and Fermenta was acquired in early 1995.
