Sovereign and Public Investor Topics: Asset Allocation and Policy
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Real Estate

Taiwan Seeks to Merge Four Public Pension Funds

The government of Taiwan is seeking to merge the island’s four main public pension funds into one entity. Combined, the four pensions control around US$ 109 billion in assets. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

If Size Matters, Financial Sector Most Attractive for Sovereign Wealth Funds Between 2007 to 2013

sovereign wealth fund sector deals

Source: Sovereign Wealth Fund Transaction Database, April 2014, Billions USD

In the past decade, sovereign wealth funds produced major strides when it comes to direct investing. From the start of 2007, till the end of 2013, the top three sectors for direct sovereign wealth fund investment were financials, real estate and energy. The 2007 banking bailouts are still major contributors to the financial sector aggregate figure.

Gazing forward, 2014 and 2015 are projected to be very active years for the asset-bulky sovereign wealth funds in direct investing.

According to the proprietary Sovereign Wealth Fund Transaction Database, the financial sector led the pack with over US$ 206 billion transactions recorded from 2007 till the end of 2013. Institutional real estate totaled US$ 83.1 billion, a dramatic jump from the 2005 to 2011 figure of US$ 54.5 billion. Norway’s Government Pension Fund Global (GPFG), Singapore’s GIC Private Limited and the Abu Dhabi Investment Authority were some major sovereign wealth fund investors in properties globally.[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

A Big Deal: GIC Pays $1.3 Billion for Meguro Gajoen

Singapore sovereign wealth fund, GIC Private Limited, beat out other institutional investors to acquire Meguro Gajoen from Dallas-based Lone Star Funds for around 134 billion JPY (US$ 1.3 billion). Meguro Gajoen is based in central Tokyo and is comprised of an office tower, hotel and banquet hall. The key tenant is Amazon Japan, the Japanese unit of Inc.[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

Florida SBA Buys 1370 Broadway for $186 Million

The Florida State Board of Administration (SBA) acquired the 16-story building at 1370 Broadway for US$ 186 million in cash from Morristown-based Normandy Real Estate Partners. The building is located in the middle of Times Square South. It is in close proximity to Bryant Park. Normandy Real Estate renovated the property and hired CBRE to market it for sale.

Normandy Real Estate Partners bought 1370 Broadway in 2012 for US$ 125 million from Sitt Asset Management and Carlton Associates. Carlton Associates is the investment office of the Cohen family, founders of Duane Reade. At the time, the building was marketed by Eastdil Securities.

In 2003, 1370 Broadway was purchased by Sitt Asset and Carlton Associates acquiring it from SL Green Realty for US$ 57.8 million.

SOFAZ Makes First Asian Real Estate Purchase

The State Oil Fund of Azerbaijan (SOFAZ) has purchased Pine Avenue Tower A in Seoul, South Korea for US$ 447 million. The prime office complex was sold utilizing a competitive auction process managed by Mirae Asset Management on behalf of the four owners which include, NongHyup Bank, NongHyup Life insurance, Woori Bank and KDB Life Insurance. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

Blackstone Raises €5.1 Billion for Euro Real Estate Fund IV

LondonNew York-based Blackstone Group LP has closed its Goliath-like European Real Estate Fund at its cap of €5.1 billion. This is Blackstone’s fourth European real estate fund – also being the largest dedicated European real estate fund the world has seen. Some institutional investors in the real estate fund include, New York State Teachers’ Retirement System, Texas County & District Retirement System, Pennsylvania Public School Employees Retirement System and the North Carolina Retirement Systems.

Blackstone is banking on the limited availability of opportunistic capital in mega transactions.

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Qatari Diar Chooses DC for US Office

Qatari Diar Real Estate Investment Company, a subsidiary of the Qatar Investment Authority, is opening up a regional office in Washington D.C. The office will enable Qatari Diar to pursue opportunities in the Americas.

The office will be located in City Center D.C. Stephen Pettit will head the office in the Americas.

Panama Developments

Qatari Diar is partnering in a joint venture on developing Panama Pacifico, a massive mixed-use real estate development. The developer is London & Regional Panama, International. The project is on the former site of Howard Air Force Base, on the western bank of the Panama Canal.

Alaska Permanent Fund Commits £250 Million to UK Real Estate

The Alaska Permanent Fund Corporation (APFC) committed £250 million to LaSalle Investment Management for commercial European real estate. Late to the U.K. property party, this is the first time the APFC has allocated capital directly to European commercial real estate. The capital committed will be managed in a custom U.K. real estate separate account. The money will target properties between £50 million and £150 million, and will consider all sectors, including mixed use.

The Alaskan sovereign wealth fund has an existing institutional relationship with LaSalle. The APFC has nearly US$ 900 million invested with LaSalle in U.S. institutional real estate.

In a LaSalle press release, Michael Burns, executive director at the Alaska Permanent Fund Corporation, said: “While the entry into Europe is clearly expected to provide diversification benefits, the increased capital dedicated to real estate (both domestically and globally) compels us to expand our footprint and opportunity set. We are excited to team up with LaSalle in the UK and are encouraged at the pipeline of opportunities.”

CPPIB and Piramal Ink $500 Million Alliance in Indian Residential Development Debt

The CPPIB is making further inroads into India by betting on the country’s real estate sector. CPPIB Credit Investments Inc., a subsidiary of the CPPIB, and Piramal Enterprises Limited inked a deal for providing rupee debt financing to residential developments across India’s urban corridors. These corridors include Mumbai, Delhi, Bangalore, Pune and Chennai. Project debt financing will target best-of-breed local developers that have substantial track records in high-quality residential projects. The CPPIB is playing on India’s emerging middle class and urbanization of the country.

Piramal Enterprises is a diversified company with a portfolio in financial services, real estate, pharmaceuticals and information management (Decision Resources Group). The CPPIB and Piramal, through Indiareit Fund Advisors (real estate arm), have each committed US$ 250 million. Indiareit has been appointed as an advisor.

Vikram Gandhi, founder of VSG Capital Advisors, advised CPPIB with regard to the deal. Macquarie Capital advised Piramal Enterprises in the deal.

In 2013, the CPPB embarked on a major deal with Shapoorji Pallonji Group to purchase Indian office buildings in major cities.

Pimco Keen on Ireland’s NAMA Real Estate Loan Assets


Laurent Luccioni, PIMCO, executive vice president and head of commercial real estate investments, Europe

Ireland’s National Asset Management Agency (NAMA) owns a portfolio real estate loans that were originated by Dublin-based banks. California-based asset manager Pimco is seeking to purchase NAMA’s €4 billion loan portfolio in Northern Ireland. The portfolio could be worth approximately €1 billion if it were put on the open market. Part of the loan portfolio includes undeveloped land which negatively affects the face value of the portfolio.

Pimco with nearly $2 trillion in assets under management has approached Irish policymakers in late 2013 about their intentions to acquire the massive loan portfolio. Pimco previously touted itself as the “authority on bonds.” Other institutional investors have expressed interest in the property loan portfolio as well.

In reaction to investor requests on the loan portfolio, NAMA released a statement, “Nama constantly reviews its portfolio to assess opportunities for maximising returns from loans or assets within the portfolio.”

NAMA added, “In addition, it frequently receives approaches from investors expressing interest in acquiring loans or assets in its portfolio and reviews such approaches on an ongoing basis.”

Pimco Bets on Global Deleveraging in Europe

Pimco executives have been expanding investment capabilities in European fixed income, particularly in property loans. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

Alaskan Sovereign Wealth Fund Performs Landlord Walkthrough

Increasing in frequency, sovereign wealth funds center on due diligence when it comes to direct property investing. The Alaska Permanent Fund Corporation’s (APFC) Board of Trustees is conducting due diligence visits in February on flagship properties where the fund owns a significant stake. The trustees plan on touring Tysons Corner Center Mall and the Reserve at Tysons, located in McLean, VA. The Permanent Fund has US$ 500 million invested in Tysons Corner and owns 50% of the property along with REIT-developer Macerich. The wealth fund has been an investor in Tysons Corner Center since early 1985, successfully betting on the wealth and growth of DC’s suburbs.

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New Mexico State Investment Council Commits 295 Million to Alternatives

The New Mexico State Investment Council (NMSIC) has committed around US$ 295 million to private equity and real estate funds. Some alternative fund managers include TPG Capital, the Blackstone Group and Exeter Property Group. Blackstone’s pitch for their Asian real estate fund included a statement that “there are few large scale pan-Asian opportunistic investors.” They also believe there are many forced sellers in the market.

Key Legislative Updates – New Mexico State Investment Council

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Insurance Companies Compete Against Sovereign Funds for Institutional Real Estate

Growing in prevalence, global insurance giants like Munich-based Allianz SE are competing against sovereign funds on core properties. Historically, institutional real estate has been an important asset class for insurers. In 2013, Allianz had issues finding enough “good” deals in real estate.

The 9.1% increase in total deal amount reflects a growing appetite for real assets by sovereign wealth funds.

The mad rush toward real assets was prompted by central banks lowering rates, forcing institutional investors to crave yield in illiquid asset classes like real estate. The bidding conflicts over institutional real estate by sovereign funds, elephantine pension funds, real estate managers and other insurance companies are creating bubble-like conditions in certain markets.

Earlier in the 2000s, insurance companies used to compete for prime properties from real estate investors like the Kuwait Investment Authority, the Abu Dhabi Investment Authority and GIC RE. In some circumstances, insurance companies sold these properties to sovereign wealth funds, yielding nice profits. For example, in July 2008, Tishman Speyer Properties and Prudential Real Estate Investors (owned a German real estate entity, TMW) sold a 90% stake in the Chrysler Building to the Abu Dhabi Investment Council. More public investors are allocating to real estate.

Other sovereign funds and large pensions are either entering the direct property game, or increasing allocation like Norway’s Government Pension Fund Global (GPFG), the China Investment Corporation, Korea’s National Pension Service, CPPIB and China’s State Administration of Foreign Exchange (through special vehicles). Norway’s SWF has even found insurers as partners like Metlife.

Direct Sovereign Wealth Fund Transactions – Real Estate – Billions USD

real estate sovereign wealth fund
Source: Sovereign Wealth Fund Transaction Database, January 2014

The mega shift of sovereign wealth money toward real assets is having a profound effect in global real estate markets. Direct sovereign wealth fund transactions in real estate totaled US$ 16.35 billion in 2012 and increased to US$ 17.83 billion in 2013. The 9.1% increase in total deal amount reflects a growing appetite for real assets by sovereign wealth funds.

GIC Goes Back to School

Singapore’s sovereign wealth fund, GIC Private Limited and Macquarie Capital have announced a joint venture to take a majority stake in Iglu, a student accommodation owner, developer and operator. This is not the first time the GIC has invested in student housing. In 2005, the sovereign fund established a joint venture with UNITE Capital Cities to invest in student housing in England and Scotland.

After the United States and the United Kingdom, Australia is the #3 most popular foreign student destination.

Iglu, which came into inception in 2010, has a property portfolio value of A$ 150 million (US$ 132 million). Properties include a 98-bed facility near Central Station in Sydney, a 395-bed facility in Chatswood (a Sydney suburb) and a 414-bed facility in Brisbane; the Chatswood property is still in the planning stages.[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

NBIM and MetLife JV Acquire 425 Market and DC Office

Karsten Kallevig - CIO Real Estate, NBIM - Photo Credit: NBIM

Karsten Kallevig – CIO Real Estate, NBIM – Photo Credit: NBIM

Metlife, Inc. and Norges Bank Investment Management (NBIM) through their joint venture purchased two Class A office buildings in Washington, DC and San Francisco. The Norwegian sovereign wealth fund has made major inroads in U.S. core real estate. The San Francisco office property is Norway’s first real estate investment on the West Coast. The joint venture is 47.5% NBIM and 52.5% Metlife. The net purchase price for the San Francisco and DC properties for 47.5% for NBIM is US$ 480 million. This brings the gross value of the two assets to around US$ 1 billion.

San Francisco Property[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

Did ADIA Buy China’s General Growth Shares?

An amended filing made by the Abu Dhabi Investment Authority (ADIA) suggests that the Gulf-based sovereign wealth fund may have been one of the main buyers of a large stake in General Growth Partners Inc. (GGP) sold by the China Investment Corporation through Brookfield Asset Management.

In mid-December, ADIA submitted an SEC filing stating that, through its sovereign wealth enterprise, Revere Holdings Limited, it purchased over 17.6 million shares in General Growth and warrants to purchase just over 3 million shares through “consortium liquidity transactions” for “cash”. On the same day, the holding company also received 12 million shares in the company and warrants to purchase 3.3 million shares.[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

GIC Partners With British Land for Broadgate

Singapore sovereign wealth fund GIC Private Limited (GIC) and British Land Company Plc announced a strategic partnership for Broadgate, a premier office complex in London, shortly after the Asia based wealth fund acquired a 50% stake in the complex from Blackstone Real Estate Partners Europe III and Blackstone Real Estate Partners VI. The other 50% interest is owned exclusively by British Land.

The Blackstone Group acquired the 50% stake in 2009 from British Land. The need for increased financial flexibility necessitated the sale.

The Sovereign Wealth Fund Institute noted in August 2013 that GIC had its eye on the purchase from Blackstone, but the institutional investor did not make any formal announcements until December.[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

Norway Sovereign Fund Inks US Property Deal with Prologis

Norway’s sovereign wealth fund entered into a joint venture deal with Prologis Inc. to acquire a 45% interest in a 12.8 million square foot portfolio of industrial and logistic properties in the United States. The 66 properties are located throughout the United States in eight states across nine markets including Southern California, Pennsylvania, the San Francisco Bay Area, New Jersey, Las Vegas, Chicago, Seattle, Atlanta, and Miami. The deal also forms Prologis U.S. Logistics Venture (USLV) which allows the JV to acquire further real estate investments in the United States.

The sovereign fund will pay US$ 450 million for the 45% interest, valuing the entire portfolio at around US$ 1 billion. Prologis is the seller and will hold the other 55% interest. Prologis will manage the portfolio properties.

The deal is unencumbered by debt and no financing was involved in the closing.

According to the press release by Norges Bank Investment Management, Karsten Kallevig, chief investment officer for real estate, stated “We are investing in a solid portfolio of logistics assets close to key transportation hubs.”

On December 20, 2012, the sovereign fund through a joint venture purchased a 50% stake in a European logistics property portfolio from Prologis.

European Cities Compete for Institutional Investor Operational Presence


A significant portion of the world’s largest sovereign funds have offices in London, including the revolution battered Libyan Investment Authority (LIA). Elephantine pension investors such as the Canada Pension Plan Investment Board (CPPIB) and Korea’s National Pension Service also have a presence in London. Institutional investors are naturally attracted to financial centers. Since 1986, the financial services sector experienced deregulation in the U.K., and multiple executive administrations, despite political party changes, have kept the environment relatively attractive for financial capital. Granted, countries and states like Luxembourg and Jersey have advantages of structuring investment vehicles; the U.K. has economic size to its advantage.

The battle of luring the world’s largest institutional investors to a core European city has been brewing for quite some time.

Culturally, the British have an extensive history of being a colonial power, pushing influence in all corners of the globe. This can be true also of the French, Portuguese, Dutch and Spanish, but the British were able to influence regions from where sovereign funds have sprouted like Brunei, Kuwait, United Arab Emirates, China, United States, Ireland and so on. Former territories and colonies have had long-term relationships with the British government and financial institutions – forging decades of economic cooperation and levels of trust.

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Loose Money Forces Sovereign Wealth Funds into Alternatives

Institutional investors like sovereign wealth funds, superannuation funds and public pensions are riding high on the equity market rallies of 2013. Financial media and conference companies have awarded top performance to a number of chief investment officers – CIO of the year is [fill in the blank.] When will the music stop playing and the doomsayers be correct? Will there be a major market pullback in the middle of 2014? To counter a possible drop in public equities, sovereign funds are allocating capital to real estate funds and/or buying core real estate directly. This trend is clearly evident just by witnessing Norway’s sovereign fund pick up ownership stakes in core assets in New York, Boston, Munich, Paris and London. Just in December, Norges Bank Investment Management inked a deal with Metlife to create a massive U.S. real estate platform targeting Class A office properties.

In addition, private equity raises continue to increase in frequency with larger fund commitments from public asset owners. Since 2009, fundraising has grown year over year, even when private equity funds are lying on lofty chunks of investor capital – waiting for deal opportunities. The target-rich environment from 2009 to 2011 for Western distressed assets has shrunk.

The opiate-like consequences are apparent, long-term asset owners are being forced to purchase riskier assets – enabling 2006 feelings of risk tolerance.

According to research from the Sovereign Wealth Fund Institute, more wealth funds are augmenting asset allocation toward real assets and private equity. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]