What the World's Largest Sovereign Wealth Fund Will Buy Soon

"They're the Norwegian SWF not necessarily looking to make triple-digit returns and to tell their friends at cocktail parties. They're there to find a stable source of low-risk assets which meet their pensioner' needs," said Michael Ashner, the chief executive at Winthrop Realty Trust (FUR) , a real estate investment trust that engages in the ownership and management of real property and real estate-related assets headquartered in Boston.

FUR frequently invests in large real estate transactions but hasn't worked with NBIM yet. Winthrop is currently paying a dividend with a yield to price of around 6%. Its share price has ranged from $10.32 to as high as $11.40 since Oct. 15. Below is a one-year price chart with its improving free cash flow. FUR data by YCharts

FUR's generous dividend represents a payout ratio of 250% of the company's earnings (or "funds-from-operation" as they call it in the world of REITs), which is quite lofty. Winthrop trades at a forward (one-year) PE ratio of only 9.

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The NBIM executive quoted in the Journal article stated, "We like having partners -- 50% owners or thereabouts." For tax purposes the SWF will set up domestic REITs in the U.S. in which it plans to hold, at most, a 49% stake. "I don't know when we will get comfortable with other structures," he said.

Gateway cities like Boston, New York and Washington with strong prospects for both population growth and economic expansion are the SWF's priorities. The NBIM executive wants areas where there is a lack of real estate supply, "...though he acknowledged that staying in that tight-knit pocket of markets could have the fund missing out on activity in other hot markets like Dallas or San Francisco."

Like all disciplined and selective investors, the SWF of Norway knows that it'll probably miss some great deals in those hot markets, "...but we're OK with that," the executive said. That's the way some of the largest REITs in the U.S. operate as well.