NBIM makes debut Asia property deal

The world’s largest sovereign wealth fund has made its first real estate bet in Asia.

Norges Bank Real Estate Management has agreed to acquire a 70 percent interest in five properties in Tokyo for JPY 92.75 billion ($823 million; 698 million). The acquisition has been made in partnership with Tokyo Land Corporation, that will own the remaining 30 percent interest and manage the properties.

The portfolio comprises approximately 3,720 tsubo, or 1,323,96 square feet, of retail and office space. The total value of the portfolio, following the acquisition, is estimated to be JPY 132.5 billion.

“We are pleased to team up with a solid and knowledgeable partner such as Tokyo Land Corporation, whose focus on the greater Shibuya area puts them in a good position to manage the portfolio. We look forward to jointly developing the venture further,” Karsten Kallevig, chief executive officer of Norges Bank Real Estate Management, said in a statement.

The entry of Norway’s $1 trillion Government Pension Fund Global (whose investments NBIM manages) into Asia’s real estate market comes six years after it first ventured into the asset class with a 25 percent stake in Crown Estate portfolio in London. As of September, 2017 NBIM’s real estate allocation by region was 50.1 percent in Europe and 49.9 percent in the US.

Kallevig has previously been quoted in media reports as saying that Japan or Singapore was the likely starting point for NBIM’s push into Asia. The fund has offices in Tokyo, Singapore and Shanghai, and has been active in other asset classes, including equities and fixed income.

In the statement announcing the deal, he also added “Tokyo will be an important part of the fund’s long-term real estate portfolio.”

Real estate has been a key asset class for NBIM’s portfolio diversification plans as its holdings are heavily weighted in equities and fixed income. As of end September 2017, 2.5 percent of the fund’s portfolio was allocated to unlisted real estate, while 65.9 percent was invested in equities and 31.6 percent in fixed income. NBIM has a 7 percent real estate allocation ceiling.

The Oslo-based fund has not yet made investments in private equity and infrastructure.