* Buys stakes in 5 properties for $600 mln from TIAA-CREF
* Still has $30 bln left to spend on real estate
* To focus this year on U.S. and Europe before eyeing Asia
By Balazs Koranyi and Ilaina Jonas
OSLO/NEW YORK, Feb 11 Norway's $700 billion oil
fund made its first property purchase in the United States on
Monday and plans to spend billions more this year enlarging its
portfolio, its real estate chief said.
The fund, the world's biggest sovereign wealth fund, bought
a minority stake in a portfolio of five properties for around
$600 million from U.S. asset manager TIAA-CREF and is looking
for more, it said in a statement.
The deal is part of the fund's commitment to diversify,
gradually moving its focus away from Europe and widening the
types of assets it holds as it invests Norway's surplus oil
While the first deal with TIAA-CREF includes smaller U.S.
office buildings, it is likely the first step in a partnership
that will allow Norges Bank Investment Management (NBIM),
manager of the Norwegian Government Pension Fund Global, and
TIAA-CREF to pool their resources to buy large very pricey
office properties that are expected to hit the market over the
next couple of years.
"It will help us to diversify our current portfolio as well
as to diversify going forward and buy some of the larger CBD
(Central Business District) office properties that require
significant investments in cities like New York," said Suzan
Amato, TIAA-CREF managing director and head of global real
estate strategic joint ventures.
TIAA-CREF chiefly invests in real estate for the long-term.
It is one of the largest real estate managers in the world with
$19 billion in direct equity investments in real estate.
TIAA-CREF provides retirement benefits for academics,
researchers and others, and has total assets under management of
The Norwegian fund is the most recent foreign fund to enter
the U.S. market with deep pockets.
"I think when you've got the 800-pound gorilla like the
Norwegians and Middle East and China, they're going to stay in,
for the foreseeable future, those gateway cities," said Lawrence
Longua, clinical associate professor at New York University
Schack Institute of Real Estate.
Those markets offer investors stability, where prices, even
in the most dire downturn, rebound, he said.
The United States could eventually represent a substantial
chunk of the Norwegian fund's real estate investments.
"Having roughly one-third of the portfolio in the U.S. is a
good target. Of course, that could mean 25 percent or 40 percent
and we can debate that over time," Karsten Kallevig, the fund's
real estate chief told Reuters.
The fund can hold 5 percent of its portfolio in real estate,
or around $35 billion, indicating that it could build a U.S.
portfolio in excess of $11.5 billion.
Its properties are still worth less than 1 percent of the
fund so it has close to $30 billion left to spend before
reaching its limit.
The fund is initially looking for low risk transactions as
building the portfolio puts a burden on its management capacity.
"We are in the build-up phase so it makes sense to probably
start out with more core assets and not move too fast up the
risk curve too early," Kallevig said.
"We have started at the lower risk end of the spectrum and
higher risk very often means more complex, more difficult
transactions," he said.
On Monday it purchased 49.9 percent stake in a portfolio of
five office buildings totaling 1.9 millions square feet of
property that TIAA-CREF already owns. The properties include:
- 33 Arch Street, a newly built, 32-story office building in
Boston's financial district.
- 470 Park Avenue South, comprised of two towers, one 12
stories, the other 18, in the tech-popular Midtown South market
- 475 Fifth Avenue, a 24-story building, built in 1925,
across from the New York Public Library main building. The
property is being upgraded to a top quality office building.
- The Evening Star Building at 1101 Pennsylvania Avenue in
Washington, D.C. It is one of only 13 privately owned office
buildings between the White House and the US Capitol on
Pennsylvania Avenue in Washington, D.C.
- Franklin Square, a 12-story office building at 1300 I
Street in Washington, D.C.
The Norwegian fund this year will focus on Europe and the
major east coast U.S. cities, then turn its attention to Asia
and the rest of the Americas "sometime in the future," said
"If you were a betting guy, you'd look at the biggest and
most liquid markets. In Asia, there are for to six countries
that are meaningful... Japan, Australia, Hong Kong, Singapore,
China and Korea," he said.
"In the Americas, there's Canada, Mexico, Brazil and
Argentina," Kallevig said, adding that this was a list of places
for potential investment and not a commitment.
The fund, managed by Norway's central bank, started buying
property in 2011 with high end property in Paris and London. It
made a $1.6 billion investment in a portfolio of European
warehouses in December.
It generally buys property in partnership with a more
experienced property investor or alone, if the property has a
long-term secured tenant.