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Norwegian Pension Fund Global enters US real estate market

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GLOBAL – The Norwegian Pension Fund Global has entered the US property market, buying a nearly 50% stake in five office properties owned by TIAA-CREF.

The NOK3.8trn (€529bn) fund said in a joint statement with the US financial services provider that it had acquired a 49.9% stake in the buildings, valued at $1.2bn (€900m).

The Norwegian oil fund said it would look to acquire further buildings as part of its joint venture with TIAA-CREF, which will continue to manage the five properties located in Washington DC, New York City and Boston.

Future acquisitions by the pair would "primarily" focus on the three cities, they added.

Karsten Kallevig, CIO for real estate at Norges Bank Investment Management, said: "As the world's largest real estate market, the US will be an important part of the fund's long-term property portfolio. We will initially seek to invest in key East Coast cities."

The fund previously said it would seek to allocate one-third of its real estate portfolio to US holdings.

Tom Garbutt, head of global real estate at the $500bn TIAA-CREF, praised NBIM as an "excellent partner" for the provider, which oversees a number of pension plans for academic employees in the US.

Garbutt particularly praised the Norwegian's focus on high-quality assets in "gateway" cities.

"Our relationship with NBIM extends our real estate investment platform at a time when we see compelling investment opportunities, and it allows us to further diversify our portfolio," he said.

At the end of September, TIAA owned $19bn of real estate assets directly.

It has entered joint ventures with a number of large European institutions in the past – in 2011 agreeing a $1.5bn deal with Dutch pension manager APG to invest in 'super-regional' US shopping malls.

It also launched an agricultural land company with Sweden's AP2 in 2011, a venture that has since been boosted through investments by several large Canadian pension managers.

The deal comes less than two months after the Norwegian Ministry of Finance cleared NBIM to invest in the US.

Up until the end of December, the Pension Fund Global's real estate mandate only allowed European property holdings, with exposure to 12 countries at the end of December.

At the time, nearly one-third of the fund's real estate holdings were in France, 26% in the UK and 20% in Switzerland.

It had a further 9% holding in Germany, with smaller stakes ranging between 1% and 3% of total portfolio value in the Netherlands, Italy, Spain, Belgium and Sweden, as well as the Central and Eastern European countries of Poland, Hungary and the Czech Republic.

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  • QN-2546

    Asset class: Real Estate Equity Fund (non listed).
    Asset region: Europe.
    Size: Total CHF 600m, approx. CHF 100-300m per fund investment.
    Closing date: 2019-06-28.

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