Norway's Government Pension Fund Global, Oslo, agreed to buy 50% in seven properties in Paris for $1 billion from AXA as part of its plan to add at least $25 billion in real estate assets to boost returns.
The 3.1 trillion Norwegian kroner ($580 billion) fund announced Tuesday it will form a joint venture with AXA Real Estate to own 1.68 million square feet of mainly office properties. The fund expects the transaction to close in the third quarter.
“We intend to hold these for quite some time,” Karsten Kallevig, head of real estate at Norges Bank Investment Management, which oversees the fund, said at news conference in Paris. “Our strategy is to focus on larger, more transparent, liquid centers. Those are London, Paris and some German cities. Over time, we will look at other markets.”
Norway's oil fund last year got approval to put 5% of its capital in real estate, moving away from bonds to help it meet a 4% annual return target. The fund is mandated to hold 60% in equities and 35% in fixed income, It earlier this year said the next property purchases would be in France and Germany after completing a £452 million ($723 million) deal for a 25% stake in the London Regent Street shopping area.
The joint venture will “allow AXA France Insurance Cos. to reallocate capital and diversify into other European markets, especially the U.K. and Germany,” Pierre Vaquier, CEO of AXA Real Estate, said in a statement.
While the fund is now starting to look at German cities, it isn't “done” with London and Paris, Mr. Kallevig said. There will be opportunities in 2013 and 2014 when many real estate loans made before the financial crisis will mature, he said.