(Bloomberg) -- Norway’s $1.4 trillion sovereign wealth fund has become a partner on a project to build an office skyscraper near Manhattan’s Grand Central Terminal.

Norges Bank Investment Management purchased a 45% stake in a planned 900,000-square-foot (84,000-square-meter) tower at 343 Madison Ave., according to people with knowledge of the transaction, who asked not to be identified discussing a private matter. Last month, Boston Properties Inc. said that it had a joint-venture partner on the project, which would replace a former Metropolitan Transportation Authority headquarters, but didn’t name the investor. 

The venture signed a 99-year ground lease with the MTA for the site. Under the agreement, the developers are required to construct a new entrance to the rail terminal.  

Plans aren’t yet final, and the partners have the ability to terminate the ground lease and be reimbursed for costs associated with transit access, Boston Properties said on its earnings call last month. 

Spokespeople for NBIM and Boston Properties declined to comment. 

NBIM has billions in dry powder to spend on properties from offices to logistics, John McCarthy, head of the fund’s US unlisted real estate investments, said in an interview. The fund is seeking to increase its holdings in the country, especially Manhattan, where it’s already a joint-venture partner on buildings including 2 Herald Square and Google-leased offices on Hudson Street.

While New York is contending with a glut of empty office space, McCarthy sees it as more resilient than other cities.

“There’s more capital here, and more people that are looking to take advantage of this disruption, which will allow New York to move through this period more efficiently,” McCarthy said.

Waiting for Deals

Offices have been hit especially hard in the commercial-property downturn, with vacancies soaring thanks to the rise in remote work. The recent jump in borrowing costs has curtailed transactions, leaving buyers and sellers with few markers to determine pricing. Investors with money to spend are waiting for bigger discounts to materialize.

“We will be acquisitive,” McCarthy said. “As challenges continue to persist and time goes on, better opportunities will likely present themselves.” 

NBIM isn’t immune to the pain landlords are facing. Returns for its 345 billion krone ($32 billion) unlisted global real estate portfolio fell 4.6% in the six months through June, partly due to higher office vacancies, the fund said in August. NBIM has written down the value of its US holdings significantly over the past year and a half, with more write-downs expected, McCarthy said. 

The fund may look to allocate as much as 7% of its holdings to real estate, according to McCarthy. The share was 3.9% as of the second quarter.

His team is focused on properties and sectors with strong growth trends. Those might include unique office buildings near transit hubs such as Grand Central, and properties with stable incomes and long-term tenants. NBIM also is zeroing in on offices that are smaller compared with the ones in its portfolio today. 

“Large assets in today’s environment have very little liquidity around them, so we have a keen focus on a more manageable size,” McCarthy said. 

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