The Real Deal New York

International briefs

December 14, 2010
By The Real Deal

Norway’s investment arm stays out of real estate

Analysts with Norges Bank, the central bank of Norway, are predicting that the European real estate market has further to fall.

Yngve Slyngstad, the head of the bank’s asset management sector, told Bloomberg News that while the country’s sovereign wealth fund plans to make more investments soon, it may hold off on real estate opportunities until prices drop further.

According to Bloomberg, the fund, which is worth 2.76 trillion kroner (or roughly $430 billion), is the second-largest sovereign wealth fund in the world and the largest stock investor in Europe. Still, Slyngstad said the fund foresees bigger problems ahead for real estate in the region.

“A difficult situation in the bond market may make opportunities in real estate better” later, Slyngstad told Bloomberg last month. “Quite a few real estate owners need to refinance their debt; therefore, we think there can be better opportunities in the future.”

And there’s reason to believe in Norges Bank’s market acumen — the bank posted a 3.9 percent first-quarter return this year, after shedding a large portion of its investments in the struggling Spanish and Greek markets, according to Reuters.

Despite slump, Japanese property fund optimistic

Japan’s largest commercial property fund, Japan Retail Fund Investment Corp., is accelerating plans to sell a collection of properties valued at around $346 million.

The fund — a joint operation between Mitsubishi Corp. and UBS AG bank — is planning to sell the 18 properties it acquired from LaSalle Japan REIT after the two companies merged in March, according to BusinessWeek.

Although the fund had planned to wait a few years for the market to improve before selling off the properties, fund manager Takuya Kuga decided to speed things up because conditions got better earlier than expected, he said.

“The market conditions have turned favorable since we announced the merger,” Kuga said. “We are hoping to sell the office portfolio together with residential buildings.”

But others are less optimistic, saying that there is still a severe overall market malaise in Japan. Properst Co., a residential developer, filed for bankruptcy protection last month, as condo sales in Japan slowed to their lowest point in nearly 20 years, according to Bloomberg. Meanwhile, in Tokyo, land prices dropped to their lowest levels in more than three decades and new condo sales saw their worst performance in 17 years.

Spain scrambles to respond to real estate-related losses

The Spanish government has been working frantically to cut costs to deal with real estate-related debt that has hampered the country’s economy.

While Greece has nabbed most of the headlines for its ongoing fiscal woes, banks in Spain are in dire straits. An estimated 2.8 million homes were built in Spain during a five-year pre-recession construction boom, according to Morgan Stanley data cited in the New York Times last month. But only 1.5 million of those homes, or just over half, were actually sold.

Some economists and financial experts remain concerned that the biggest hurdle to a real estate recovery, unemployment, could continue to worsen in Spain. Early last month, the National Statistics Institute reported an unemployment rate upward of 20 percent.

“There is a major risk that unemployment will remain uncomfortably high for several years as Spain struggles to generate a sufficient number of jobs,” Raj Badiani, an economist with financial analysis firm IHS Global Insight, told the Financial Times. “We expect the unemployment rate to remain above 15 percent of the labor force until 2014.”

Compiled by Amy Tennery

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