Norges Bank Investment Management (NBIM), manager of Norway’s Government Pension Fund Global, ended 2013 with the formation of two major real estate partnerships in the US. The new alliances, with MetLife Real Estate Investors and Prologis, are the latest property joint ventures in the US forged by the world’s largest sovereign wealth fund in the past year, beginning with TIAA-CREF in February 2013 and followed by Boston Properties in September.
NBIM has a long-term goal of investing up to five percent of its total assets in real estate. In 2012, the sovereign wealth fund indicated its intentions to begin making property investments in the US, with plans to commit up to one-third of its real estate capital in the country.
The Prologis venture, which involved NBIM acquiring a 45 percent stake in a 12.8 million-square-foot logistics portfolio for $450 million, is notable in that it represents NBIM’s first industrial investments in the US and is the only partnership not pursuing office investments. The two parties previously collaborated on a €2.4 billion joint venture in Europe in December 2012. “The new venture is very much built off the momentum of the European venture,” said Jim Green, managing director of global client relations at Prologis.
Meanwhile, the MetLife partnership is similar to the TIAA-CREF and Boston Properties joint ventures. All three will be focused on buying prime office assets in US gateway markets and, to date, each have acquired more than $1 billion worth of properties. NBIM and MetLife currently have invested in three properties in Boston, Washington DC and San Francisco with an aggregate gross asset value of $1.7 billion.
Robert Merck, global head of real estate at MetLife, said he expects another strong year of core real estate investment activity in the US in 2014. “The markets have strengthened fundamentally over the last few years, so some properties that maybe were core-plus and had some leasing issues have become stabilized and will be coming on the market,” he said.
The MetLife joint venture has been the most aggressive among NBIM’s four US partnerships. It is the only alliance that has executed follow-up investments and accounts for the largest share – $718 million, or nearly 30 percent – of the total $2.45 billion in equity that NBIM has committed to its US property ventures thus far. The sovereign wealth fund declined to respond to questions regarding its US investment strategy in real estate.
The MetLife joint venture, moreover, has a broader geographic focus than the other two office partnerships, which are targeting the East Coast markets of New York, Washington DC and Boston. The new venture, meanwhile, also has planted its flag in San Francisco, yielding NBIM’s first office investment on the West Coast. In addition, MetLife and NBIM potentially could invest in the West Coast markets of Los Angeles and Seattle, as well as Chicago.
That said, all three office joint ventures to date have been concentrated on investments on the East Coast. While NBIM may be seeking to rapidly expand its exposure to these gateway markets by teaming with multiple investment managers, these joint ventures could find themselves vying against each other for the same core US real estate assets. Ultimately, the sovereign wealth fund could find itself to be its own fiercest competitor.