Five-Building Purchase In Joint Venture with TIAA-CREF Could Be the First of Billions Invested in the U.S.
The Norwegian Government Pension Fund Global has made its first investment in the U.S. property market. The giant, $665 billion pension fund bought a 49.9% ownership interest in five office properties in the U.S. from through a joint venture with New York-based financial services provider TIAA-CREF.
This past December, Norway's government approved a change in the law permitting its national pension fund to invest in property outside Europe for the first time. The fund’s manager, Norges Bank Investment Management, said it could target up to $11 billion in the U.S.
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At the end of the third quarter, the pension fund held less than 1% off its assets in real estate, well below its 5% targeted goal. Norwegian officials predicted it would take years before it would reach the planned level of off shore real estate investments. The fund is forecast to grow to $1.1 trillion by 2020, indicating it could hold $55 billion in real estate by then.
The first of the U.S. property assets it purchased are located in New York City, Washington DC, and Boston and are valued at $1.2 billion. TIAA-CREF, the seller, retained 50.1% of each property and will manage the buildings on behalf of the partnership.
The properties consist of 1.9 million square feet (172,450 square meters) of rentable space
. Two of the properties are in New York City, two in Washington DC, and one in Boston. The TIAA-CREF/Norges Bank joint venture will seek to acquire additional office properties, primarily in these three cities.
“As the world’s largest real estate market, the U.S. will be an important part of the fund’s long-term property portfolio,” said Karsten Kallevig, chief investment officer for real estate at Norges Bank Investment Management (NBIM), the fund’s manager. “We will initially seek to invest in key east-coast cities.”
About the properties:
33 Arch Street, Boston:
is a newly built, 32-story, 603,309-square-foot office building
in the Financial District. The property is LEED Gold Certified.
470 Park Avenue South, New York
: is a 292,000-square-foot boutique office building in the Midtown South submarket.
475 Fifth Avenue, New York
: is a 24-story, 275,738-square-foot office building, built in 1925, located on the southeast corner of 41st St. and Fifth Avenue. "Located directly across from the main entrance to the New York Public Library, the property is currently being redeveloped as a Class A office building.
The Evening Star Building, Washington, DC
: at 1101 Pennsylvania Ave. NW is one of only 13 privately owned office buildings located between the White House and the U.S. Capitol on Pennsylvania Avenue.
Franklin Square, Washington, DC:
at 1300 I St. NW., this 12-story office building totals more than 464,000 square feet and was designed by Philip Johnson.
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