Norwegian Fund To Spend $6 Billion/Year on Global CRE
Among the Cities To Be Targeted: New York, Boston, San Francisco and Washington DC
June 26, 2014
Norges Bank Investment Management (NBIM), which manages Norway’s $611.2 billion global pension fund and which has shown a growing penchant for U.S. real estate, is looking to grow its global real estate investing significantly over the next three years.
The fund currently holds about $6.2 billion in real estate-related assets. It expects to invest 1% of the fund (about $6 billion) each of the next three years in the private real estate markets.
As part of that plan, NBIM intends to organize its real estate division as a separate entity, and strengthen the investment management decision-making structure. In doing so, NBIM expects to hire 200 people for its real estate organization by 2016.
“Our real estate investments will require in-depth knowledge and a local presence, and we will strengthen our market research,” NBIM disclosed in its 2014-2016 strategy plan. “Due diligence covers market, financial, legal, tax, operational, technical, insurance and environmental considerations, and will be strengthened as we invest in fully owned properties.”
NBIM’s real estate investments to date have primarily been implemented through joint venture agreements. Going forward, it will prepare the organization for management of fully owned properties and plans on taking a more active role in the development of its properties.
Larger ownership stakes in listed real estate companies and public-to-private transactions will be considered.
“We aim to build a global, but concentrated, real estate portfolio. Our strategy is to focus our investments in a limited number of large global cities, where we invest in core retail and office properties. Our U.S. investments will be concentrated in New York, Washington DC, Boston and San Francisco,” the strategy plan stated. “In our real estate portfolio, we continue to prioritize large equity investments in high quality assets. Investment opportunities in real estate are evaluated based on in-depth analysis of the assets’ expected net cash flow after tax and costs.”