REAL ESTATE – The Norwegian finance ministry has issued a tender for a company to draft a report on tax issues relating to investments in real estate and infrastructure in 32 markets outside Norway.

The report, which is required by mid-June, is intended to assist the NOK1.82trn (€224.4bn) Norwegian Government Pension Fund – Global to gain its first exposure into real estate.

The ministry identified Belgium, Finland, France, Greece, Ireland, Italy, the Netherlands, Portugal, Spain, Germany, Austria, the UK, Denmark, Switzerland and Sweden as European markets of interest.

It added that in Asia the fund would be looking into investments in China, Japan, Hong Kong, Singapore, South Korea, Taiwan, Thailand and Malaysia.

The US, Canada, Turkey, Israel, Australia, New Zealand, Brazil, Mexico and South Africa would also be considered, it said.

The ministry noted that the 15 European countries, together with the US, Canada, Japan and Australia, accounted for more than 90% of the institutionally invested property market. The ministry added that while the fund saw investment potential elsewhere, it was likely that those countries would account for some 90% of any real estate portfolio held by the fund in the near future.

"It has not been decided whether Norges Bank would also be managing any real estate portfolio," the tender document said, adding that the portfolio could be managed by the ministry itself or "by a designated company".

Consequently, the report should also look into any possible tax consequences arising from a decision on whether the Norges Bank were the manager of the fund’s future real estate portfolio.

The fund would also consider both direct and indirect real estate investment, the ministry indicated. But it added, "there has been a general trend away from direct investments involving labour-intensive internal management, towards various forms of indirect investments. Direct real estate investments are often less sophisticated than indirect ones, and aim for a large part of the return to be in the form of stable rent income."

The ministry said for indirect exposure it preferred equity instruments to fixed-income as "equity instruments are the ones that would permit the fund to realise diversification benefits in its portfolio".

The deadline for participating in the tender is April 12.