DC's Still Waiting With Open Arms for Norges

WASHINGTON, DC-One of the first commercial real estate investments Norges Bank Investment Management made in the US, one year ago, was in the Washington DC area. Since then the sovereign wealth fund has been snapping up properties around the country and per its new agreement with Prologis, will clearly continue.

The question for the local CRE community is when will the love return for DC? On one hand the Prologis JV holds out hope. As we reported yesterday, Prologis and Norges signed a $1 billion agreement to extend its European partnership into the US. The venture will acquire a $1 billion stabilized portfolio of 66 logistics facilities totaling approximately 12.8 million square feet across the U.S. The portfolio will comprise a portion of assets from Prologis' former North American Industrial Fund III and Prologis Institutional Alliance Fund II. The venture is expected to close in January 2014.

On the other hand, the Washington DC area is losing its luster for foreign investors. That is what James A. Fetgatter, chief executive of Association of Foreign Investors in Real Estate, tells GlobeSt.com – a point noted in AFIRE's report last year. "Generally I can say right now that DC is looked on less favorably than it has been in the past," he says. AFIRE's next report will be released on Jan. 6, 2014.

Norges' stake in the DC market, however, is a solid one and perhaps the performance of its existing assets might spur the SWF to invest further. In February the fund picked up a 49.9% interest in five commercial office properties from TIAA-CREF: 1101 Pennsylvania Ave. and 1300 I St. in Washington, DC; 33 Arch St. in Boston; and 470 Park Ave. S. and 475 Fifth Ave. in Manhattan. The value of the sale was $1.2 billion.

If the Prologis JV doesn't come through for DC there is always its new partnership with MetLife. The two plan to invest in class A office properties in key US markets over an extended period.