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Norwegian oil fund ups real estate exposure via US spending spree

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Norges Bank Investment Management (NBIM) has increased its exposure to real estate as it targets office and retail properties in established markets.

In its 2013 results presentation today, the bank said investments for its real estate portfolio accounted for 1% of its fund at the end of 2013, up from 0.7% a year earlier.

The mandate to invest in real estate was broadened from 1 January 2013 to include countries outside Europe – with the US first stop.

A first property investment in the US was made at the start of last year via the $600m (€438m) acquisition of a 49.9% stake in a five-asset portfolio in Boston, New York and Washington.

A further $684m was spent on a 45% stake in a New York office building in the fourth quarter, coinciding with the $238m purchase of a 47.5% stake in a Boston office building.

The US now accounts for 18.7% of the bank’s real estate portfolio.

The UK and France account for 27% and 22.5%,, respectively of investments made by NBIM.

The investor has typically taken half stakes in the real estate it has acquired in both Europe and more recently the US.

Last year, it paid €388m for 50% of two buildings in Germany.

A 50% stake in a portfolio of 195 European logistics properties was bought for €1bn at the start of 2013.

NBIM’s real estate investments returned 11.8% last year.

Measured in local currency, rental income contributed 4.6% of the return, while changes to the value of properties and debt and currency fluctuations both contributed 3.8%.

However, transaction costs for real estate purchases resulted in a 0.4% hit.

Investment in property is, it added, being gradually increased to as much as 5% of the value of the overall fund.

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