There are worries in some property markets, but it is not time pull out yet, investor says
Karsten Kallevig, CEO of Norges Bank Real Estate Management, oversees US$24 billion in real estate, and is looking for more
There may be worrying developments in some property markets, but the world’s biggest sovereign wealth fund said it had no intention of pulling back from real estate.
A gap is opening between what stock-pickers think real estate is worth and what assets could be worth in the physical market, a potential sign that a correction could be looming. For example, the largest real estate investment trust in the UK, Land Securities, now trades at a 36 per cent discount to net asset value.
“It’s clearly a red flag in pricing if anything is too far off in any direction,” Karsten Kallevig chief executive officer of Norges Bank Real Estate Management, said in an interview at his Oslo office on Wednesday.
Kallevig, 43, now oversees US$24 billion in key real estate, including much of London’s Regent Street, as well as properties on Times Square in New York and the Champs Elysees in Paris, among other prime spots. Overall, the fund holds about US$1 trillion in stocks, bonds and real estate, and is in the process of building its property holdings to about 7 per cent of its total portfolio.
While Kallevig acknowledged that in times of dislocation it was good to be cautious, the alarm bells were nowhere near as loud as they were in early 2016, when the fund took a six-month hiatus from property buying to figure out what was going on.
So far, the fund still has an appetite for new acquisitions. “I haven’t pulled back mandates, that is for sure,” Kallevig said.