Norway breaks into US real estate with $600m purchase

The manager of the €506 billion Norwegian Government Pension Fund Global has purchased a half-stake in a five-strong portfolio of Grade A offices in New York, Washington and Boston from TIAA-CREF.

After buying in the French, UK, German and Swiss real estate markets, Norges Bank Investment Management (NBIM) has now taken its bow in the US by buying a half-stake worth $600 million in a portfolio of US office properties.

The manager of the €506 billion Norwegian Government Pension Fund Global has purchased a 49.9 stake in a portfolio of five Class A offices valued at $1.2 billion from New York-based retirement fund and financial services firm TIAA-CREF. The properties in the portfolio are in New York, Washington and Boston, and comprise 1.9 million square feet.

According to announcements by the two parties, NBIM and TIAA-CREF plan to co-invest in additional office properties in the three cities in the future. As part of the partnership, TIAA-CREF will manage the assets they acquire. 

“This is the fund’s first real estate investment outside Europe and is in line with our strategy to build a high-quality global property portfolio,” said Karsten Kallevig, chief investment officer for real estate at NBIM.

“NBIM is an excellent partner for us as we share a similar approach to real estate investing,” said Tom Garbutt, head of global real estate for TIAA-CREF. “We believe direct investment in real estate and these principles add value for our clients over time.”

“Our relationship with NBIM allows us to further diversify our portfolio,” Garbutt added. The new venture advances TIAA-CREF’s strategy to sell stakes in its assets to global investors and then manage them on behalf of jointly owned ventures. TIAA-CREF also currently manages real estate investments with APG of The Netherlands and the Future Fund of Australia. As of September 30, TIAA-CREF directly owned more than $19 billion of office, retail, industrial and multifamily properties across the US, Canada and Western Europe.

NBIM’s plan to invest stateside was underlined in December, when the manager said it eventually wanted to be investing one-third of its target allocation for the asset class in the country. The sovereign wealth fund, which is managed by NBIM, is mandated to gradually invest up to 5 percent of its assets in real estate, which would be achieved through a corresponding decrease in bond holdings. A report from Bloomberg reveals that NBIM plans to invest as much as $11 billion in the US.

Government Pension Fund Global made its first real estate investments in 2011, initially focusing on investing in the largest European real estate markets. To date, it has executed deals in London, Paris, Frankfurt and Berlin and made its most recent acquisition late last year, with the purchase of the Uetlihof office complex in Zurich from Credit Suisse for 1 billion Swiss francs (€825.5 million; $1.1 billion).

NBIM currently has a real estate team of 20 people, up from three professionals in 2010, when the sovereign fund received its mandate to invest in real estate from the Norwegian finance ministry. A spokeswoman said the team is expected to grow further as the manager continues to expand real estate investments on behalf of the fund.