MetLife Inc., the largest U.S. life insurer, joined Norway’s $810 billion sovereign wealth fund in a venture that will invest in U.S. office properties, starting with one of Boston’s tallest buildings.
The initial bet with Norges Bank Investment Management is on One Financial Center, a 46-story building in Boston’s Dewey Square, the New York-based insurer said today in a statement. Norges Bank paid $238 million for a 47.5 percent stake, the fund said in a separate statement, and MetLife holds the rest.
MetLife is courting institutional investors as Chief Executive Officer Steve Kandarian builds an asset-management unit to increase fee income. The insurer won its first commitment in August when SunTrust Banks Inc. agreed to invest as much as $5 billion in commercial mortgages originated by MetLife.
“This venture speaks to our strong capabilities in the asset-management space, where we are targeting opportunities to leverage our scale to create long-term value for our investors,” MetLife Chief Investment Officer Steve Goulart said in today’s statement.
Norges Bank plans to increase real estate to about 5 percent of holdings and made its first U.S. property investment this year. The world’s largest sovereign-wealth fund bought a 49.9 percent stake in five U.S. office properties from insurer TIAA-CREF for $600 million, the firms said in February. At the time, TIAA said it planned to make more property investments with the fund.
Norway generates money for the fund from taxes on oil and gas, ownership of petroleum fields and dividends from its stake in Statoil ASA, the country’s largest energy company. The fund also bought commercial properties in London, Paris, Frankfurt, Berlin and Zurich. It’s worked with Axa SA, France’s biggest insurer, on property investments in Europe.
MetLife was unchanged at $51.19 at 4:15 p.m. in New York. The shares have gained 55 percent this year.
“We expect this to be a long-term strategy that we will work on together,” Robert Merck, head of MetLife Real Estate Investors, said in an interview. “It fits right alongside our strategy of leveraging our scale and our industry-leading platform to become a major player in the investment-management business.”
The class-A Boston property near South Station is 1.3 million square feet (120,000 square meters), according to the statement, and ranks as the city’s seventh-tallest building, according to Emporis GMBH, which tracks data for skyscrapers worldwide. Norges Bank bought its stake from an affiliate of Beacon Capital Strategic Partners V LP in a deal that was completed this month, the fund said. MetLife increased its stake to 52.5 percent from 50 percent.
Commercial real estate values in the U.S. have recovered more than 70 percent of their losses since bottoming in 2009, boosted by demand for the best buildings in the largest cities, according to the Moody’s/RCA Commercial Property Price index. The advance had slowed earlier this year amid a rise in mortgage interest rates, property researcher Green Street Advisors Inc. said in a report this month.
MetLife had $55.1 billion invested in real estate at the end of last year, including $43.1 billion in commercial mortgages and $12 billion in equity, according to today’s statement.