EUROPE - Norges Bank has made its first real estate investment for the Norwegian Government Pension Fund Global, acquiring a 25% stake in The Crown Estate's Regent Street portfolio in London.
The NOK2.8trn (€342bn) sovereign wealth fund confirmed it would invest in the asset class, for the first time in its history, in March 2010, and that the £448m (€509m) deal would be its first step toward reaching its 5% allocation target.
Norges Bank Investment Management (NBIM), which is managing the fund's real estate investments, has agreed to buy a 150-year lease on the 25% interest in the London portfolio, which comprises 113 buildings spread over 39 blocks on one of capital's busiest shopping streets.
The agreement means the fund will receive a quarter of the portfolio's net income, arising mainly from office and retail space rent, with the Crown Estate retaining the balance of income.
Yngve Slyngstad, chief executive at NBIM, said: "A move into real estate will strengthen the fund, which today is solely invested in stocks and bonds.
"The Crown Estate would continue to be responsible for the management of the portfolio, while NBIM would take part in significant capital decisions."
It will be the first time The Crown Estate has directly managed assets on behalf of a third-party investor, and funds raised from the sale will be used for investment across its existing portfolio.
The Crown Estate said the move was in line with its investment strategy to focus on rebalancing the urban portfolio by investing in commercial assets outside of London, in the marine estate and in core central London holdings.
Roger Bright, chief executive at The Crown Estate, said: "We are delighted one of the world's largest sovereign wealth funds has chosen The Crown Estate and Regent Street for its first-ever property investment.
"NBIM's long-term approach is aligned ideally with The Crown Estate's own core values, commercialism, integrity and stewardship."
Since 2002, The Crown Estate has been implementing a £1bn regeneration programme in Regent Street to transform it into an international destination for business and retail.
Current retailers include Apple, Banana Republic and Jaeger, and office tenants include Lloyds TSB and Matrix Group.
The Crown Estate's Regent Street team, led by David Shaw, head of Regent Street Portfolio, will continue to manage the properties on behalf of the partnership, which is committed to building on the regeneration programme through large-scale redevelopment and investment in the street's public realm.
Costs for the ongoing programme will be shared proportionately between the two partners.