Sovereign Wealth Funds Gather in Cali

When it comes to global movers and shakers in the world of commercial real estate, they don’t come much larger than the Sovereign Wealth Funds, which are meeting in SoCal this week.

The Institute Council of Investors, a group founded by the Sovereign Wealth Fund Institute, is holding its annual Spring Summit April 24-26 at the Ritz-Carlton in beautiful Dana Point, Calif. The event is an exclusive, private affair, but is designed to provide a forum for open discussion about insights and trends into the tight-knit world of SWFs.

Oh, what will they be discussing? Most likely one of the top agenda items will be the rear record-setting financial results by one of their own, the huge $650 billion Norway Pension Fund Global (NPFG). The fund, the largest wealth fund in the world with an allocation of up to 5% of its assets in global real estate, returned 13.4% in 2012, its second-ever best performance. The fund was set up in 1990 as a fiscal policy tool to support long-term management of Norway’s petroleum revenue.

While equity investments returned 18.1%, real estate was a laggard, returning just 5.8%. The fund is actually quite new to the real estate sector in general, making its first real estate investments in 2011 in office and retail properties in London and Paris.

Now the fund is making moves to address the situation. Last year it made global headlines when it announced it would invest up to $11 billion in U.S. office and retail properties in the coming years. Initially it will invest in core East Coast markets.

NPFG made its first foray to America with the purchase of a 49.9% stake in five office properties through a joint venture with TIAA-CREF. The assets in New York City, Washington D.C. and Boston total 1.9 million sq. ft. and are valued at $1.2 billion. TIAA-CREF, the seller, retained 50.1% of each property and will manage the buildings on behalf of the partnership. The joint venture will seek to acquire additional office properties, primarily in these three cities.