Norway Fund Partners to Purchase Property Loans

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Norway's government pension fund is joining AXA Real Real Estate in a joint venture to invest in real estate loans in Europe, worth up to €600 million ($815 million).

The venture plans to invest in primary issuances of commercial real estate loans, focusing on France, Germany and the U.K., the companies said in an announcement today. 

AXA Real Estate, with more than €46 billion of assets under management, will manage the portfolio on behalf of Norges Bank Investment Management, manager of the Norwegian Government Pension Fund Global. 

"The joint venture will allow Norges Bank Investment Management to achieve two main objectives: invest in commercial real estate debt, and invest alongside an experienced team with balance sheet capacity and a long term investment horizon," the fund said. 

The European market was once dominated by banks, which are now facing pressure to reduce their exposure. The region faces a real estate debt funding gap -- the difference between debt needing financing and the funds available -- of $50 billion for 2013-14, Reuters reports. 

"This partnership consolidates our competitive advantage in that it increases the size of individual real estate loans we can underwrite to €600 million," Isabelle Scemama, global head of real assets finance at AXA Real Estate, said in the release. "We are now looking forward to co-investing alongside them as we seek further opportunities to invest in the European CRE debt markets."

AXA Real Estate is the largest pan-European investment manager with an existing €7.5 billion debt platform, according to the company. So far in 2013 the company has invested €1.8 billion in commercial real estate loans, out of the €2.5 billion target for the year.

Norway's oil fund, one of the largest investors, is looking to establish itself as a major player in real estate. The fund, which invests Norway's surplus oil tax revenues, is allowed to invest up to five percent of its portfolio in property. 

So far, the fund has focused on quality property in major cities like New York, Paris and London. In June, the fund purchased a £250m portfolio of suburban warehouses in the U.K.

The fund has partnered with AXA before. They purchased a €702.5 million property portfolio in Paris in 2011, according to Reuters.