Norway in Three-Way Fight for London Complex Share

The world’s largest sovereign wealth fund is vying for Blackstone’s 50% ownership of Broadgate.

Yngve Slyngstad, CEO, Norges Bank Investment Management

(June 10, 2013) - Norway's sovereign wealth fund (SWF) is competing for half of the Broadgate office and London's main business district.

Two other contenders are fighting for the 50% stake, which is being sold off by asset manager Blackstone: Canadian developer Brookfield and Deutsche Bank's property investment arm Rreef.

According to the FT, if the deal goes ahead, it is expected to net Blackstone a hefty profit on its 2009 investment in the four-mile square foot estate, which was valued at £2.1 billion at the time by its owner British Land.

Norges Bank Investment Management's (NBIM) interest in London property is symptomatic of other SWFs--billions of pounds have been invested in the City and the West End from across Asia, the Middle East and Europe, as cash-rich funds look to expand their fixed asset portfolios.

Offers for Blackstone's share are expected to see the estate's total value rise to between £3 billion and £3.5 billion, the FT reported.

NBIM is already in a 50:50 joint venture with British Land on its Meadowhall shopping centre in Sheffield, and in the six months to March 2013, NBIM increased its property investment by more than 10 times on the same period a year ago.

And last week, NBIM bought £250 million of regional warehouses in the UK.

Elsewhere in Norway, the public sector occupational pension scheme the KLP ("Kommunal Landspensjonskasse") decided to divest from French oil company Total on ethical grounds, due to the company's involvement in Western Sahara.

Jeanett Bergan, head of responsible investment at KLP Asset Management, said in a statement: "KLP considers Total's operations on the continental shelf off Western Sahara can be linked to contravention of fundamental ethical norms."

Based on the pension fund's own review, along with urging from the Norwegian authorities and the experience of previous similar cases, KLP said it decided investing in Total might "flout basic ethical principles", according to a report in the Sahara Press Service.

The ethics in question appear to be over a subsidiary of total-E&P Maroc-which is conducting exploration and charting operations of potential oil and gas deposits on the continental shelf off Western Sahara.

Western Sahara is currently occupied by neighbouring Morocco. Campaign groups, such as the Western Sahara Resource Watch, are calling on international companies to not do business with Moroccan companies or authorities in occupied territories, as it makes the occupation seem politically legitimate.

KLP believes the Total situation resonates with that of US company Kerr-McGee in 2005. On that occasion, Kerr-McGee was excluded from both the Norwegian Government Pension Fund Global and KLP.

However, that exclusion was revoked by the Norwegian Ministry of Finance in May 2006 after the company stopped exploring in the area, and the company was then brought back into KLP's investment universe during 2006.

Related News: Norway Takes on Risk Factors and Norges Bank's Five-Factor Equity Risk Model

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