Norway’s Wealth Fund Targets U.S. Real Estate by End 2013
By Josiane Kremer - Oct 1, 2012 3:26 AM ET
Norway’s $650 billion sovereign wealth fund is closing in on its first U.S. real estate investment as the market struggles with stagnant prices.
The fund will invest in the U.S. “by the end of next year at the latest,” Trond Grande, deputy chief executive officer at Norges Bank Investment Management, said in a Sept. 27 interview in Molde, Norway. “The U.S. is the largest real estate market so if you want to have a global portfolio you must have exposure to the U.S.”
Built from Norway’s oil and gas wealth, the fund in 2010 got approval to invest as much as 5 percent of its capital in real estate as it seeks to meet a 4 percent return target. It has since bought properties in Paris and London for about $2 billion and real estate accounted for 0.3 percent of its holdings at the end of June.
The fund is preparing its move as a recovery in U.S. real estate values “lost steam” in the last three quarters, Moody’s Investors Service said in a Sept. 13 report. While values have recouped 42 percent since bottoming in January 2010, they are still 22.5 percent below the December 2007 peak on the Moody’s/RCA Commercial Property Price index.
Deal Forecasts
The Urban Land Institute last month cut its forecast for U.S. commercial real estate sales by 12 percent to $748 billion through 2014 because economic projections are “down considerably.” Deals will be $223 billion this year, $250 billion next year and $275 billion in 2014, according to a ULI survey released last week. In March, sales were forecast at $250 billion this year and $290 billion next year.
Some financial centers in the U.S., such as Manhattan’s Plaza district, an area near Central Park that commands the nation’s highest office rents, are facing falling occupancy rates as banks reduce office space. The availability rate for offices in the Manhattan Plaza submarket reached 12.3 percent in August, a two-year high, according to data from Colliers International. It was 10.5 percent in the third quarter of last year. Financial-service firms have announced about 60,000 job cuts worldwide this year, according to data compiled by Bloomberg.
Norway’s fund, which gets its revenue from taxes on oil and gas, ownership of petroleum fields and dividends from a 67 percent stake in Statoil ASA, will spread its real estate investments over time as it builds a global portfolio.
more:
http://www.bloomberg.com/news/2012-09-30/norway-s-wealth-fund-targets-u-s-real-estate-by-end-2013.html
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