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Norwegian SWF Teams Up with TIAA-CREF to Buy U.S. Real Estate

Norway’s $662 billion Government Pension Fund Global, the world’s largest sovereign wealth fund, recently bought an almost 50 percent stake in five U.S. office buildings owned by New York–based financial services provider TIAA-CREF.

Norway’s sovereign wealth fund, the world’s largest, is warming to U.S. commercial real estate. Last month the $662 billion Government Pension Fund Global, managed by Norges Bank Investment Management, an arm of the Norwegian central bank, bought a 49.9 percent stake in five office buildings in Boston, New York and Washington owned by New York–based financial services provider   TIAA-CREF.  They range from a historic beaux-arts office building in downtown  Washington to a modern high-rise in Boston’s financial district.

The $600 million deal, NBIM’s first foray into the U.S. property market, is a move to diversify the Norwegian fund’s fast-growing real estate portfolio. In March 2010, NBIM announced a real estate investment program with an aim of allocating 5 percent of the fund’s assets to the sector. As much as one third of it may be spent in the U.S., according to a recent statement by Karsten Kallevig, Oslo-based CIO for real estate; today that translates to some $11 billion. On the hunt for other U.S. opportunities, NBIM will keep working with  TIAA-CREF, its newest joint venture partner, which has $502 billion in assets and $19 billion in direct real estate equity. “We’re going to go shopping,” says Suzan Amato, head of TIAA-CREF’s global real estate joint ventures. 

NBIM’s property push won’t stop as long as the sovereign wealth fund’s assets continue to rise on the back of Norway’s exporting power as one of Europe’s largest oil and natural-gas producers. The real estate program is still relatively small, less than 1 percent of the fund’s total assets. Before its first U.S. acquisition, NBIM had Karsten Kalleviginvested in commercial and retail properties in Berlin, Frankfurt, London, Paris and Zurich, and taken a stake in a portfolio of 195 industrial real estate facilities across Europe.

NBIM and TIAA-CREF will initially seek out office and retail buildings in gateway cities on the East Coast. For now they’re focusing on high-­quality assets whose prices have held up well postcrisis. “Properties are coming up now that trade fairly infrequently,” Amato says, “and this market really favors well-capitalized equity players who can afford to look at those larger assets.”

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