With its fund growing, KLP has its work cut out to reach its allocation target. Gunnar Gjørtz speaks to Rachel Fixsen
Norway’s KLP is on the hunt for real estate investments at all stages of development as it works to step up its allocation and keep pace with the growth of its overall fund. The country’s largest pension fund in public pensions, KLP has 12% of its assets – more than NOK300bn (€36.8bn) – invested in property.
“We are aiming for 14% in real estate, so we are underinvested at the moment,” says Gunnar Gjørtz, CEO of the fund’s property arm KLP Eiendom. The fund invests in offices, hotels and shopping centres, and these investments are located in the cities of Trondheim and Oslo in Norway, and in Stockholm and the Øresund region in Sweden and Denmark.
The exclusive Nordic delineation is about to blur, however, with the fund now eyeing hotel investment opportunities in London.
“Being underinvested by 2% and seeing our mother fund KLP growing rapidly, we will have to make significant real estate investment in the years to come,” Gjørtz says. “That will mean buying and developing land, buying shopping centres outright as well as buying existing buildings. We will need to invest in NOK10bn to NOK15bn of property assets in the next two to three years to move from 12% to 14% and keep pace with the growth of KLP.”
All investments in KLP’s real estate portfolio are held directly. “We are what we call industrially organised, so we do things ourselves,” Gjørtz explains. “We rent out property, we do maintenance ourselves and we have all the service processes in place.”
In this way, KLP Eiendom differs from many other institutional investors. “We hire people to keep the knowledge in house,” says Gjørtz. “We try to do as much development as we can; we would rather develop new buildings than buy property in the market.”
KLP Eiendom has 115 employees, and has separate organisations operating in Oslo, Trondheim, Copenhagen and Stockholm. “In London we are currently looking for opportunities,” he says. “We are working with some specific cases there that might materialise in the near future,” he says.
The sheer volume of investment KLP Eiendom will have to undertake to meet what is a moving target means it needs to look for alternatives and cannot afford to stick with the type and geography of investments it has been making so far. “London is a well-developed market, we know the culture, it’s transparent – it’s everything the international investor would look for,” he says. “You can say the market is expensive, but that is what we would be prepared to do.”
But Gjørtz says the Norwegian fund has no interest in investing in property via funds at the moment. KLP did invest indirectly several years ago, but this was not a success, he says.