Norway fund buys half of €1.4bn AXA portfolio

First London retail, now Paris offices. Norges Bank Investment Management, which invests the capital of Norway’s Government Pension Fund Global, steps into the next of its target markets as it increases its recently established real estate portfolio.

Norway’s Norges Bank Investment Management (NBIM), the investment platform responsible for investing the capital of the country’s Government Pension Fund Global, has formed a Paris offices-focused investment joint venture with the real estate arm of French insurance giant AXA.

The state fund, which held assets under management of NOK 3,102 billion (€400 billion; $578 billion) as at March this year, has acquired a 50 percent stake in a seven-strong office portfolio valued at €1.4 billion from AXA France Insurance Companies and managed by AXA’s AXA Real Estate Investment Managers.

The assets total 1.67 million square feet in gross letting space and are located in either the western or central business hubs of the city. They will continue to be managed by AXA REIM.

Karsten Kallevig, chief investment officer, real estate, at NBIM said: “The investment is in line with our strategy to initially invest in the biggest European property markets before expanding into other regions. It also reflects our preference to form partnerships with investors that both own and operate properties

The deal follows NBIM’s November outlay for a 25 percent stake in London’s prime retail area, Regent Street, for £448 million (then €531 million; $710 million) from the Crown Estate – its first investment in real estate since the Norwegian government approved a mandate to invest up to 5 percent of its total assets into the sector in March 2010.

Following that investment, Kallevig told various media NBIM was keen to make further outlays of more than $500 million a deal in transactions where the state fund takes stakes of between 25 percent and 85 percent – the central strategy of that enabling NBIM to take positions of control while not assuming day-to-day management responsibilities. “Our key is to fund local partners with skin the game”.

Kallevig predicted then Paris would be a market to follow London. He said cities in Germany would also feature during 2011 and following there, it would seek to make investments in the US before looking at emerging markets such as those in Asia. It is expected that the fund will reach the 5 percent allocation between four and eight years.

On AXA’s part, the joint venture enables AXA France Insurance Companies, which traditionally provides AXA REIM with significant investment capital, with the ability to further rebalance its investment portfolio exposure to large Paris offices. The sale will also simultaneously afford it the possibility of diversifying its geographical footprint as it reinvests the proceeds, while retaining a significant stake in a set of Paris offices, which it said should benefit form future growth.

Pierre Vaquier, chief Executive of AXA Real Estate, said: “The Joint Venture will allow AXA France Insurance Companies to reallocate capital and diversify into other European markets, especially the UK and Germany, while maintaining exposure to this important market by retaining a significant stake in the joint venture. We will continue to manage the portfolio and look forward to working with Norges Bank in this exciting partnership.”