7/6/2012 10:46:41 AM

Norwegian SWF Chases La Belle Vie

Norway’s sovereign wealth fund will invest $341 million in Parisian commercial real estate, the latest of its moves to capitalize on attractive European real estate opportunities.

(July 6, 2012) — Europe's largest sovereign wealth fund will buy 50% of a multimillion Parisian property portfolio to take advantage of a robust real estate market.

Norway's $600 billion sovereign wealth fund will buy half of five commercial properties for €275 million ($341 million). The properties, owned by the Generali Group, represent almost 40,000 square meters of office and retail space in the heart of Paris. Norges Bank Investment Management (NBIM), which manages the sovereign wealth fund, and the Generali Group also agreed to form a join venture to oversee the investment. According to the Norges Bank, the partnership will focus on a long-term real estate investment strategy that could branch out to other European markets.

"We... hope to expand the relationship [with Generali] in the years ahead," says Karsten Kallevig, NBIM’s chief investment officer for real estate. "The transaction will increase our exposure to high-quality properties in central Paris."

NBIM has looked to invest the sovereign wealth fund's assets in real estate for some time. In 2010, the fund raised its allocation to real estate to 5%, earmarking $25 billion for the alternative. Soon thereafter, it purchased a $722 million stake in UK Crown Estate’s Regent Street, consisting of 113 buildings in London. At the time, Dag Dyrdal, the chief strategic relations officer at Norges Bank, told aiCIO that, while the fund’s expansion into real estate would be conservative, it would look across Europe for attractive opportunities for investment.

The Norwegian sovereign wealth fund is far from the first foreign asset owner to see an opportunity in Parisian commercial real estate. In August 2010, Korea’s National Pension Service acquired a 51% stake in the O’Parinor Shopping Center for $278 million.

In its latest issue, aiCIO looked at how Norway’s sovereign wealth fund has implemented a radical investment model centered on transparency, liquidity, and ethics. To read about the fund’s strategy—and to find out whether it is paying off—click here.

Contact the writer of this story:Benjamin RuffelContributing Editor203-216-1467bruffel@assetinternational.comFollow on Twitter at @ai_CIO