Norges Bank Real Estate Management could pump as much as $34bn (£27.7bn) into real estate over the next few years.
The overseas property arm of Norway’s oil-backed sovereign wealth fund makes up 3.1% of the pool but its target is for property to make up 5% and the government is considering a boost to 7%.
To achieve this, with the fund at its current size, would mean buying a further $17bn to take it to 5% and the same again to take it to 7%.
Norges is spending 0.5% to 0.67% of the total size of the fund each year on property, equivalent to $4.2bn to $5.6bn.
“Obviously the fund has become bigger over time but investing 0.5% per year doesn’t sound crazy. It’s not necessarily a goal in and of itself but a pacesetter. I think that is very feasible and that will mean that in four or five years we will expect to hit around 5% of the fund,” said chief executive Karsten Kallevig.
As a result of needing to spend such vast quantities, Norges is looking to undertake more deals by itself, rather than in joint ventures, and to target larger deals.
“We’d love to do more but from a cost point of view, from a control point of view and frankly a deal point of view, it’s attractive not to have a partner sometimes,” Kallevig said.
“Sometimes you come across something and think all of this would be good for the fund. Sometimes there are no partners that want any of it, so do we not do the deal or do it by ourselves? It doesn’t mean we will cut joint ventures but it means we will probably have a broader spectrum of things we own by ourselves and asset manage ourselves with some help.”
Read the full interview with Kallevig
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