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February 11, 2013 4:51 pm
Norway’s $705bn oil wealth fund has made its first property venture beyond Europe, investing $600m in a portfolio of offices in New York, Washington and Boston less than two months after it secured a mandate to expand overseas.
Norges Bank Investment Management said on Monday that it had agreed a joint venture with TIAA-CREF, the financial services company, to acquire a half share in five properties covering 1.9m square feet of floorspace.
The deal is the latest in a string of high-profile acquisitions by NBIM, which has gone from a bit part player in the property market to one of the most significant global investors over the past two years. In the past year the fund has increased its real estate holdings from Nkr11bn to NKr38bn.
Karsten Kallevig, chief investment officer for real estate at NBIM, said the US deal was in line with the funds’ strategy of “investing in the largest and most liquid markets”.
“All the buildings are in gateway cities and we don’t think it is the worst point in the cycle to be buying – there will be some volatility, but it’s a long-term plan,” he added.
NBIM’s previous investments have tended towards the top end of the market and include a 25 per cent stake in London’s Regent Street, Credit Suisse’s office complex in Zurich and a pair of office blocks in Berlin and Frankfurt.
NBIM has a stated strategy of investing in property through joint venture partnerships. It announced a tie-up this year with Generali, the Italian insurer, to buy offices and shops in central Paris. It also bought a half-stake in Meadowhall, the £1.5bn Sheffield shopping centre, in October.
At the end of 2012, NBIM was given the mandate to invest in property outside of Europe and announced plans to spend about $11bn in the US real estate market.
The oil fund has been keen to increase its exposure to assets other than equities and bonds with the Norwegian government giving it the target of investing 5 per cent in property.
But the fund is growing at such a pace, because of inflows from Norway’s oilfields as well as its own returns, that it is proving difficult for property to come close to matching that level, meaning that the fund’s desire to invest in other alternative assets such as private equity and hedge funds is unlikely to become reality any time soon.
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