Asset AllocationJanuary 8, 2014

Norway Renews US Real Estate Push

<em>Norges Bank Investment Management has secured 45% of real estate venture with US giant Prologis.</em>

Reported by Featured Author

(January 8, 2014) — Norway’s Government Pension Fund manager has expanded its real estate portfolio after agreeing a deal to own almost half of a joint venture with Prologis.

Norges Bank Investment Management (NBIM) now owns 45% of the newly formed Prologis US Logistics Venture. The remaining 55% is owned by Prologis, one the US’s biggest real estate developers.

The deal follows an earlier agreement between NBIM and Prologis, in which a European joint venture between the two parties allowed NBIM to acquire half a portfolio of 195 Class-A logistics facilities in Europe that had previously owned solely by Prologis.

The US deal, which will see the joint venture acquire a $1 billion portfolio of 66 logistics facilities totalling approximately 12.8 million square feet across the US, was finalised at the end of 2013.

Eugene Reilly, chief executive officer of Prologis Americas, said he expected the US joint venture to grow in 2014, “including through acquiring strategic portfolios and where appropriate, properties that complement the existing asset base”.

Norway expanded its real estate assets consistently throughout 2013. In December, NBIM bought a 25% stake in a central London building named Quadrant 3 from the Crown Estate, the organisation that looks after property owned by the UK sovereign.

In August, European regulators cleared the way for the fund to take a 50% stake in a Parisian property vehicle owned by insurer Generali, and in February it announced a joint venture with US real estate giant TIAA-CREF to invest in North American property.

NBIM has allocated 5% of its $818 billion portfolio—approximately $41 billion—to real estate.

Norway isn’t the only one keen to buy up real estate assets: Preqin data released in November 2013 found 54% of sovereign wealth funds invested in real estate.

Opportunistic and value-added vehicles were most favoured by sovereign wealth funds, with 74% and 65% respectively investing in these strategies.

Fifty-seven percent of sovereign wealth funds showed a preference for core real estate, a slight increase from the 55% of funds that showed a preference for this strategy in 2012, Preqin said.

Sovereign wealth funds also showed an increased appetite for distressed and debt real estate vehicles in 2013, with the proportion of sovereign wealth funds targeting each of these strategies standing at 57%.