Norway’s $1T Sovereign Fund Enters Asia with $823M Tokyo Bet

Norway’s sovereign wealth fund is making its first foray into Asian real estate, by buying a majority stake in a set of five retail and office properties in Tokyo for 92.75 billion yen ($823 million).

Norges Bank Investment Management (NBIM), which manages the Nordic nation’s more than $1 trillion pension fund, has formed a joint venture with Japan’s Tokyu Land Corporation to acquire the 12,300 square metre portfolio from Samuel Lee Tak-yee’s Veloqx Group. NBIM will take a 70 percent stake in the assets while Tokyu Land will pick up the remainder and manage the properties on behalf of the venture. The deal values the portfolio at 132.5 billion yen ($1.18 billion).

NBIM invests on behalf of the Government Pension Fund Global, which deploys Norway’s horde of surplus oil revenue and is ranked as the largest sovereign wealth fund in the world. As of September, 2.5 percent of the fund ($25 billion) was invested in unlisted real estate, which is allowed to comprise up to seven percent of the total portfolio.

Norwegian Pension Goliath Makes Maiden Asia Play

“This is the fund’s first real estate investment in Asia and is in line with our strategy to build a high-quality, global portfolio,” commented Karsten Kallevig, CEO of Norges Bank Real Estate Management in a statement. “We are pleased to team up with a solid and knowledgeable partner such as Tokyu Land Corporation, whose focus on the greater Shibuya area puts them in a good position to manage the portfolio.”

“As one of the world’s largest real estate markets, Tokyo will be an important part of the fund’s long-term real estate portfolio,” Kallevig added. NBIM’s investment marks its first partnership with Nikkei-listed Tokyu Land.

Buying Tokyo Assets From a Hong Kong Tycoon

NBIM’s newly acquired properties are located in Tokyo’s Omotesando shopping district, and include chic retail and office towers at 1-8-10 Jingumae; 6-31-17 Jingumae; and 6-12-18 Jingumae within the Shibuya ward, and at 5-3-2 Minami-Aoyama and 5-3-27 Minami-Aoyama within the adjacent Minato ward.

The property at 1-8-10 Jingumae, Shiubya, is a nine-storey commercial tower called The Ice Cubes. Built in 2008, the 3,060 square metre building resembling a stack of ice blocks is anchored by an H&M store on the ground floor.

The seller, Veloqx Group, which develops properties in Tokyo and other locations, is believed to be controlled by billionaire London property investor Samuel Lee Tak-yee and his family. The Lee family owns Hong Kong property developer Prudential Enterprise, and also holds the 14-acre Langham Estate in London’s West End.

NBIM Brings Core Market Strategy to Asia

The Norwegian fund’s real estate strategy targets investments in office and retail properties in a limited number of core markets such as New York, San Francisco, London and Paris. NBIM made its first real estate investment outside Europe in 2013 by purchasing nearly half of a five-property office portfolio in the US valued at $1.2 billion through a joint venture with TIAA-CREF.

The fund manager followed that up with office investments in New York and Boston. In the same year, NBIM spent $450 million to buy a 45 percent stake in a US industrial and logistics portfolio from Prologis.

NBIM opened offices in Tokyo and Singapore last year, according to IPE Real Assets, with plans to replicate its real estate investment approach in Asian markets.