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. Continue reading