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Mikkel Bülow-Lehnsby

Nordic Real Estate Partners

Nordic Real Estate Partners’ Mikkel Bülow- Lehnsby was always likely to start his own firm, and when he did he changed the way real estate could work in the region.

If you need an insight into how much hard work and dedication it takes to set up your own successful real estate fund management business, Mikkel Bülow- Lehnsby can give you a view.

Nordic Real Estate Partners (NREP), the firm he set up with partners Rasmus N?rgaard and Rickard Dahlberg, secured their first investor, Cheyne Capital, in 2005. In London, flushed with success, they bought a bottle of champagne. They didn’t get round to drinking it for five years.

‘Our first employees still joke about this ,’ Bülow-Lehnsby says. ‘The first few years of establishing the business were quite intense, and it did not seem like a priority to celebrate our accomplishments, considering how many opportunities and critical milestones lay ahead.’

‘But now NREP has grown and we try to make sure to take time to show our appreciation of our team and their successes.’

There is a lot for chief executive Bülow-Lehnsby, his nine partners and the NREP team to celebrate these days. Starting from scratch ten years ago, NREP has raised nine funds and completed close to 180 property acquisitions and developments, of which 80 have been exited. The firm has grown into one of the most successful real estate fund managers in the Nordic region, with assets under management of about €2.4bn and a team of sixty professionals across four offices in Stockholm, Copenhagen Helsinki, and Oslo. Its latest fund, the Nordic Strategies Fund, raised €400m of equity in December 2014, against a target of €325m and is already fully invested.

And in May this year the company’s decision to become an early investor in the prime logistics market bore fruit when it sold a €650m pan-Nordic portfolio to a consortium of four Danish pension funds, an exit which has contributed to NREP’s recent Preqin ranking as the number one most consistently outperforming manager in Europe.

How NREP got to this position, how Bülow-Lehnsby ended up in real estate at all, the challenges of being an entrepreneur and the value he sees in INREV as a niche fund manager are all topics the Dane talks about with enthusiasm, intelligence and good humour.

Bülow-Lehnsby was always likely to set up his own business rather than become a cog in a larger machine - but it was by no means certain that this business would be in real estate.

At school and university, rather than getting a job in a shop or a bar, he started a series of businesses of his own - such as a small travel company organizing ski trips for students, a restaurant franchise business, as well as a business involved in digitising advertising in the early days of the internet. ‘I’ve always found it interesting to build things, all the way back to high school, it’s how I spent my spare time,’ he says.

His journey into real estate was not straightforward. After his initial degree he worked at Goldman Sachs’ corporate finance division in London, focusing on Nordic M&A transactions, and when the boom arrived a few years later he left and co-founded an internet start-up business with a partner, which he calls ‘my first real full time entrepreneurial venture’.

He ended up at Harvard Business School, and there took a class taught by real estate theory doyen Arthur Segel, who introduced him to the sector, and later became a good friend.

He teamed up with N?rgaard, who was responsible for building and executing the indirect real estate investments program in Nordea, while co-heading the direct portfolio in Denmark, and Dahlberg, who was responsible for real estate transactions at the Stockholm office of GE.

Bülow-Lehnsby identifies one of the keys to setting up your own business as doing plenty of homework about whether there is a genuine opportunity to set up a business that gives you the right reward for the risk you’re taking. And in Nordic real estate he and his partners felt there was exactly that opportunity.

If you’re going to start something from scratch it requires a lot of dedication and a lot of extra effort consistently for a very long period of time.

‘In the Nordics at that time you had a strange situation where you had no well established truly pan-Nordic real estate investment managers,’ he says. ‘It was an immature industry compared to venture capital or private equity, where you had strong local specialist teams. But in real estate, and in particularly in Danish real estate, the mentality was more that of the developer trader, and there weren’t really many people who seemed to be driven by a desire for real intrinsic value creation or building long term businesses.’

NREP now works with primarily four focused investment strategies but prime logistics is still an important business, as shown by the recent portfolio deal, and the fact that it will be a major plank of its most recent fund.

In terms NREP’s plans for the future, Bülow-Lehnsby says that getting better is more important than getting bigger. ‘It is about constantly identifying areas, where we can create value and make a difference,’ he says. ‘I think at the moment we are the best we have ever been, but we can certainly still get better and build more skills and edge. We are looking at new focused strategies and segments, but we are humble enough to know that we can’t just do it overnight. It takes a lot of resources and thought to start something new.’

In terms of how NREP operates, he adds that being a member of INREV is highly beneficial to the company, due to the work it does for the sector in general, and also in the assistance it gives to NREP as a smaller fund manager.

‘I’m very enthusiastic about the work INREV does,’ he says. ‘I think it is important that INREV is giving our industry a voice. It would be voiceless otherwise, and some of the challenges our industry faces needs someone to speak out for it. We are on the periphery of other industries, so there is always a danger of getting caught up in regulation.

‘There is also the matter of benchmarking and transparency. Any attempt to standardise how things are measured is likewise important, such that we do not all have to invent the wheel. It is likewise important to promote transparency so that LPs can compare performance and costs of managers more easily. Overall INREV lowers the barriers to entry, in a time when generally those barriers are increasing, which is damaging for the industry and not least  the pensioners who’s capital  we manage.

In terms of starting a fund manager, or indeed any business, Bülow-Lehnsby says: ‘You have to figure out how you can make a commercial difference. Whether you are starting out on your own or working within a company, being able to make a difference is ultimately what drives success.

‘Also if you’re going to jump into something, you need to be willing to go for it 100%. If you’re going to start something from scratch it requires a lot of dedication and a lot of extra effort consistently for a very long period of time’.

Extra effort which for Bülow-Lehnsby and NREP has been well worth it.