Sovereign Wealth Fund Institute

The Qatar Investment Authority (QIA) is nearly completing the acquisition of Credit Suisse’s London headquarters. The QIA would pay £330 million for the property located in the financial district called Canary Wharf. There will be a separate sale-and-leaseback agreement to be used with Credit Suisse. The 21 floor office property is at 1 Cabot Square in London’s Canary Wharf. The building is 540,000 square feet in area.

The QIA has been an active investor and developer in English real estate. Other notable large deals in the past with Qatar’s sovereign wealth fund include, the former Chelsea Barracks site, development of Shell’s International headquarters, and development of the Olympic Village project.

The Qatar Investment Authority owns around a 6% stake in Credit Suisse and has used the bank for deals. In addition, the QIA and the China Investment Corporation own shares in UK Songbird which is the majority owner of the Canary Wharf Group.

As core real estate in London is growing in institutional investor demand, many buyers at the top in 2006 and 2007 are thinking about selling.  Maturing debt is putting pressure on real estate owners who purchased properties before the financial crises.  The Abu Dhabi Investment Authority (ADIA) and Rockpoint Europe Limited are planning to sell Devonshire Square Estate. Devonshire Square is an office block located in London which comprises of 12 buildings just east of Liverpool Street Station. The two organizations have hired CBRE Group Inc. to find buyers.

In October 2011, Rockpoint and ADIA secured an extension on debt which has been extended to April 23, 2013.  [Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view site content.]

Canadian public investors have been active in Latin America whether in direct company stakes, infrastructure, or core real estate. The Canada Pension Plan Investment Board (CPPIB) and Caisse de depot et placement du Quebec each invested $40 million to have full ownership in a beachfront shopping centre in Brazil’s Rio de Janeiro.

The 138-store shopping centre called Botofogo Praia Shopping is located in Botofogo beach. The property has been operational since 1999.

The CPPIB invested their $40 million for a 24.5% stake. Caisse de depot et placement du Quebec invested through Ivanhoe Cambridge its real estate arm to increase its stake to 75.5%.

The Korea Investment Corporation (KIC) views some European assets as attractive even during the current European sovereign debt crises. Middle East sovereign funds have shown lukewarm interest in direct European bank investment. Depending on individual liquidity needs, certain European governments and businesses are selling assets to raise cash, and sovereign wealth funds want to be in the position to take advantage of the valuation discounts. Korea’s SWF is stepping up their presence in Europe. They opened up an overseas office in London. Don’t expect any major direct investments in banks or in large part European banks from the KIC. [Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view site content.]

Several sovereign wealth funds invest a portion of their assets to capture and harvest the illiquid premium. Hence the improved aggregate demand for private equity, real estate, and infrastructure investments. Given their long-term nature, more and more SWFs are searching for means to capture this premium and capitalize on it.

Take for instance Europe’s largest sovereign wealth fund, the Norwegian Government Pension Fund – Global (GPFG) which allocates most of its assets into fixed income and public equities. Norway’s GPFG has greater liquidity compared to most other similarly-sized sovereign wealth fund peers, university endowments, and larger pension plans. The fund has taken strides to invest in more illiquid assets such as its gravitation towards institutional real estate.

Other SWFs have been more aggressive by using the illiquid premium such as Singapore’s GIC which makes direct company investments into companies and the Qatar Investment Authority.

Over the long haul, some studies have shown that illiquid assets can generate amazing returns; this was seen in the early endowment model that many private university endowments followed. Sovereign investors need to advance with caution as the illiquid premium cost is contingent on the liquidity demands of liabilities. Unfortunately in 2008-2009, the crisis caused severe strain and turmoil rendering some fire sales and generating losses. Illiquid assets can be a major burden for investors. Sovereign funds on the other hand, especially ones without contingent liabilities can weather out longer holding periods.

The Korea Investment Corporation (KIC) opened up their overseas European investment office in London on 1 Bartholomew Lane in December 2011 on the tenth floor. They now purchased an 80,000 square feet block at 1 Bartholomew Lane for around 75 million pounds. The property is opposite of the Bank of England. Hines, a U.S. real estate developer will be the asset manager.

Many sovereign investors started investing in real estate in safe haven markets like London and Paris. Norway’s GPFG made their first real estate venture in the United Kingdom. Large office income-producing properties are in demand in major European core markets.

Sowwah Square

Abu Dhabi-based Mubadala Development recently sold a commercial property joint venture called John Buck International (JBI) for an undisclosed price. JBI was mainly tasked for the development of Sowwah Square in Abu Dhabi.  The commercial development project is located in Abu Dhabi’s latest business district on Sowwah Island.  In addition, JBI specializes in integrated facilities management.  It manages a number of Abu Dhabi properties such as Sowwah Square, Paris Sorbonne University (Abu Dhabi Campus), and New York University (Abu Dhabi Campus).

The buyer of JBI is Serco, a UK property management and outsourcing business. Serco maintains a strong presence in the United Arab Emirates. Less than 9 months ago, Mubadala paid 83.6 AED million to take control of the full joint venture.

Originally the joint venture was created in 2008 with The John Buck Company, a Chicago property developer. The joint venture called JBI was at first 51% owned by Mubadala Development and the rest by The John Buck Company.

The press release states, “Global Logistic Properties Limited , the market leader in modern logistics facilities in China and Japan, today announced that GLP and China Investment Corporation, through their respective wholly-owned subsidiaries, have entered into a 50:50 joint venture to acquire 15 modern logistics facilities in Japan from LaSalle Investment Management  for JPY122.6 billion (US$1.6 billion).

A joint venture agreement and purchase and sale agreement were signed on 19 December 2011 by Light Year TMK. The initial equity injected by each party is JPY 21.22 billion (US$272.9 million). GLP will act as the asset manager of the acquired properties. This joint venture is the first collaboration between GLP and CIC.

The portfolio of 15 properties to be acquired will have a Gross Floor Area (“GFA”) of 770,989 sqm with more than 90 per cent of the GFA located within the Greater Tokyo and Osaka areas. The current occupancy of the properties is 98.3 per cent with a weighted average lease expiry of 5.6 years. The portfolio comprises modern facilities with a weighted average building age of only 6.9 years.

…..

Funding

The joint venture has entered into an agreement with a group of domestic Japanese banks for debt financing of JPY 81 billion (US$1.0 billion). GLP will fund its equity commitment of US$272.9 million from internal capital. No new equity needs to be issued to fund this transaction given GLP has US$1.7 billion of cash on its balance sheet as at September 30, 2011.”

Read more: Press Release

The Qatar Investment Authority (QIA) is a major player in European real estate, whether it is a finished asset or development.  Qatar Holdings LLC has made its first investment in a class-A office project in Poland. The sovereign wealth enterprise has signed a contract to purchase the development in Miasteczko Orange office complex in Warsaw from developer Bouygues Immobilier Polska. [Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view site content.]

It seems that Middle Eastern based sovereign funds are more keen on investing in hospitality and resort developments compared to their Asian and European peers. This is good news for the Kingdom of Morocco.  Tourism is a key source of diversifiable revenue for the North African Kingdom of Morocco. The tourism industry in Morocco employs just below 500,000 people. Cash-strapped Morocco still suffers from high unemployment, a reliance on material exports, and has a young demographic profile.

In December 2010, Gulf sovereign investors parked money into the region.  Last week, the Qatar Investment Authority (QIA) and Morocco agreed to create a 50-50 joint venture worth US$ 2 billion that targets major development projects in Rabat.

Rabat is the capital and third largest city in Morocco.

In another deal, Qatar Holdings, the Kuwait Investment Authority’s Al Ajial Investments and Aabar Investments agreed with Morocco’s Fund for the Development of Tourism to inject US$ 2.5 billion into a newly-created vehicle called Wessal Capital. Wessal Capital will focus on developing new resorts in Morocco.

Proposed Equity Capital Structure of Wessal Capital

• 25% Qatar Holdings
• 25% Al Ajial Investments
• 25% Aabar Investments
• 25% Morocco’s Fund for the Development of Tourism

The Qatari Diar Real Estate Investment Co, which is a sovereign wealth enterprise of the Qatar Investment Authority (QIA), plans to invest €250 million (US$ 337.4) in developing an Adriatic resort in Montenegro. The Qatari sovereign wealth enterprise has been active in redeveloping hospitality properties in Europe. The project is near the city of Tivat and will redevelop the 24 hectare site. The resort project will include a luxury hotel, apartments, retail shopping, and villas. Tivat is attracting high-net worth people due to its beautiful location and development of a new port project (Porto Montenegro project). The Prime Minister of Montenegro hopes to lure travelers to the city.

Norway’s sovereign wealth fund is making further progress in the Parisian core real estate market. Norges Bank Investment Management and AXA Real Estate Investment Managers have a joint venture that has exchanged contracts to acquire a portfolio of three Paris office properties for €290 million (US$ 399 million). The joint venture is purchasing the properties from SEB ImmoInvest. The joint venture between the two organizations is to target real estate co-investment opportunities in the Paris office market. Currently, the properties are fully occupied and generating rental income equal to 6% of the purchase price.

Properties Include:
28 – 32 Victor Hugo – Paris 16
Prime Office Building – Paris Central Business District

99 Avenue de France – Paris 13
Located in Rive Gauche business area

Le Prélude – Boulogne-Billancourt
Office Building -  Boulogne-Billancourt

Dubai is looking to kick start its real estate market and promote increased investment within the metropolitan region. Recently, the Investment Corporation of Dubai (ICD) and Brookfield Asset Management Inc. signed a memorandum of understanding (MoU) to form an investment fund to focus on Dubai real estate. The fund will be jointly sponsored by both entities and each will seed the fund with $ 100 million. The fund will also be open to investors being capped at $1 billion. The fund will target both freehold and non-freehold areas and have a span of 8 to 10 years.

The Kuala Lumpur International Financial District (KLIFD) is a joint development project to strengthen and centralize Kuala Lumpur’s finance hub.  The KLIFD also wants to be a destination for the Islamic finance industry.  Kuala Lumpur has over 1.6 million people and Bursa Malaysia is based in the city.

The US$ 8 billion (RM 25.07 Billion) project is being jointly developed by the Mubadala Development Company and 1Malaysia Development Bhd (1MDB).  Mubadala sees a lot of investment potential in Southeast Asia.  The Malaysian government is backing this initiative.  One huge incentive to compete with Hong Kong and Singapore is a 100% income tax exemption for a 10-year period for KLIFD-status company.

The Alaska Permanent Fund which as of August 24, 2011, had a value of US$ 37.58 billion in assets has purchased a stake in a Class A New York property. The APFC is an active investor in core real estate throughout the United States.

The Rockpoint Group was the seller in this transaction. The 49.5% stake was for an office property on 299 Park Avenue at the cost of $1,075 per square foot. The real estate deal has revalued the whole property at US$ 1.25 billion. The majority owner is developer Fisher Brothers who occupies the top two floors of the building. The Park Avenue office building was completed in 1967.

The building is well leased by several financial firms, including being the New York City headquarters for UBS Investment Bank.

Brief History
Jan 2010 – UBS sells 49.5% stake to Rockpoint Group for US$ 150 million in cash and assumes US$ 325 million mortgage

Delancey, a real estate developer in the United Kingdom and Qatari Diar have formed a joint venture. Qatari Diar is a sovereign wealth enterprise of the Qatar Investment Authority. Qatari Diar has been active in numerous redevelopments in London and throughout Europe. Various news outlets have reported the joint venture has purchased the athlete’s village on the Olympic park in east London. The deal has been reported to be at least 500 million pounds (US$ 812 million).[Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view site content.]

In recent months, the value of American luxury hotel and resorts in key markets has been slowly increasing due to higher occupancy coupled with improved room rates. Recently, a group affiliated with Paulson & Co. won a United States court battle against the Government of Singapore Investment Corporation (GIC). The court battle was over control of a portfolio of American luxury hotel and resorts.[Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view site content.]

Karsten Kallevig - NBIM

According to the press release, “The Regent Street Partnership, comprising The Crown Estate and Norges Bank Investment Management (NBIM), has announced the purchase of two Regent Street properties, 4 Conduit Street and 1 Maddox Street, for £28 million.

The partnership owns Regent Street in its entirety and the purchase was made in the partnership’s 75:25 proportions, for The Crown Estate and NBIM, respectively. The Crown Estate continues to manage the street on behalf of the partnership and retains the freehold interest. NBIM, which manages the Norwegian Government Pension Fund Global, has a 150 year lease on a 25 per cent stake in the street.

Maddox House, 1 Maddox Street, was purchased for circa £23 million from pension fund clients of Aberdeen Asset Management. It comprises 17,000 sq ft and is occupied by six office tenants over five floors, together with Regent Street retailers, Hobbs, Barker and Furla. 4 Conduit Street was purchased for £5 million from a private investor; it comprises 6,000 sq ft and is let entirely to the Greek National Tourist Office.

Karsten Kallevig, chief investment officer – real estate at NBIM said: “We’re delighted to have made these purchases and expect to continue to broaden our partnership with The Crown Estate on Regent Street.”

Paul Clark, director of investment and asset management at The Crown Estate, said: “This is an exciting year for the Regent Street Partnership and also The Crown Estate, which remains focused on enhancing its long-term contribution to the Treasury by investing in its core holdings here in the West End, in prime retail outside London, and helping drive forward the offshore renewable energy industry.”

David Shaw, head of Regent Street portfolio at The Crown Estate, added: “These are the Regent Street Partnership’s first major purchases, demonstrating its ongoing commitment to our 20 year regeneration programme that has already transformed Regent Street into an international destination for retail and business.”"

Read more: Press Release

The press release states, “Canary Wharf Group plc (“Canary Wharf Group”) and Qatari Diar Real Estate Investment Company (“Qatari Diar”) have today concluded an agreement with Shell International (‘Shell’) to redevelop the Shell Centre site at South Bank, in the heart of London.

Canary Wharf Group and Qatari Diar have entered into a 50:50 joint venture, contributing £150m each to secure the 5.25 acre site on a 999 year lease. The Canary Wharf Group £150m element of the consideration is being satisfied from existing corporate resources. The aggregate £300m payment for the site is conditional on planning permission being received for the project within three years. Canary Wharf Group will act as the Construction Manager for the project and will also be Joint Development manager with Qatari Diar. For these roles, fees will be generated for the transaction and apportioned between the parties based upon their broad level of contribution.
Discussions will now commence with local planning authorities and relevant stakeholders to establish planning consent, detailed designs and a timetable for construction for a project that will re-energise an important section of the South Bank.

The development will be mixed use, comprising office, retail and residential space. The well known 1950s, 27 storey tower in the middle of the Shell Centre will be preserved and retained by Shell. Shell will also take a 210,000 sq. ft. pre-let of one of the new office buildings to be constructed on the site.

George Iacobescu CBE, Chairman and Chief Executive of Canary Wharf Group plc said: “The South Bank is one of London’s best loved places. It is both a privilege and a great responsibility to be involved in this redevelopment project which will re-energise a key part of this area of London. We look forward to working with our partner Qatari Diar, the local community and with Shell to enhance the London economy and the vibrancy of the South Bank.”

Commenting on the agreement Mohammed bin Ali Al Hedfa, Group CEO of Qatari Diar said: “Qatari Diar is delighted to have signed this agreement with Shell. We look forward to working with our partners at Canary Wharf Group and the local community to redevelop this iconic location. When Qatari Diar begin any new project we are entering into a long-lasting commitment with our partners and the wider community to leave a positive cultural, environmental and sustainable footprint.”"

Read more: Press Release

Office rental rates in Hong Kong’s central district are at record levels. Hong Kong retail space is relatively expensive compared to other Asian core office markets and ranks close to New York City in retail rent pricing.  In addition, Hong Kong attracts a large audience of tourists from mainland China.   While many sovereign funds involved with real estate seek core European and American real estate as attractively priced, a number of sovereign funds have sought out Asian real estate deals. [Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view site content.]

According to various sources, the Hong Kong Monetary Authority through its exchange fund is planning to purchase around $500 million worth of commercial office properties in London and Paris. These properties will most likely be fully leased and in high traffic areas. Norway’s Oil Fund has already made strides in core property assets in London and Paris. HKMA has a growing asset base and it is increasing exposure to core real estate. HKMA has already made an investment in real estate through JP Morgan Asset Management. JP Morgan Asset Management made a US$ 416 million (£ 259 million) acquisition in London office property called 10 Aldermanbury Square from CommerzReal.

Choi Chong-suk, the Korea Investment Corporation’s new CEO, believes the fund must allocate greater proportion to alternative and strategic investments in its portfolio. The Korea Investment Corporation was founded in 2005 by the Korea Investment Corporation Act and the SWF moved relatively faster compared to other newly created sovereign funds in deploying funds to alternatives.

The Korea Investment Corporation is on the continued path to diversify from traditional bond and equity strategies.

They have already invested in a number of direct investments and allocated funds to a number of alternative managers. In fact, the KIC was able to acquire healthy assets at discount prices due to the financial crisis. The fund aims to expand into commodities and private equity. With regards to private equity, the sovereign wealth fund focuses on global private equity funds in distressed debt and secondary strategies. Recently, the KIC has been examining growth and buyout strategies.

Lastly, the Korea Investment Corporation has signaled interest in doing deals with other sovereign investors.

According to the press release, “the Norwegian Government Pension Fund Global agreed today to buy 50 percent of seven properties in and around Paris from AXA Group, the fund’s first real estate investment in France.

The purchase price is set at 702.5 million euros, or approximately 5.5 billion Norwegian kroner. The properties constitute about 156,000 square metres of largely office space in the western and central business districts of Paris. NBIM and AXA will form a joint venture where AXA Real Estate provides asset management services.

“The investment is in line with our strategy to initially invest in the biggest European property markets before expanding into other regions,” says Karsten Kallevig, chief investment officer for real estate at Norges Bank Investment Management (NBIM), which manages the fund. “It also reflects our preference to form partnerships with investors that both own and operate properties.”

AXA will hold the remaining 50 percent of the properties on completion of the transaction, which is expected in the third quarter. The properties are as follows:

• 12-14 Rond Point des Champs-Elysées, Paris 8e
• 1-3 / 2 rue des Italiens, Paris 9e
• 16 avenue Matignon, Paris 8e
• 24-26 rue Le Peletier, Paris 9e
• Meudon Campus, 92 Meudon
• OPUS 12, 92 La Défense
• 31-33 rue de Verdun, 92 Suresnes

Source: Norges Bank Investment Management

Qatari Diar Real Estate Investment Co, the sovereign wealth enterprise (SWE) of the Qatar Investment Authority has re-opened the historic Hotel Schweizerhof in Bern, Switzerland. Qatari Diar has been investing in hospitality real estate around Europe and has been active in rehabilitating historic properties. The 150 year old inn was renovated and more than 45 million CHF was spent on the property. It is being operated by QDHP Swiss Management, a property investment fund owned by Qatari Diar. QDHP Swiss Management has other hotels in its portfolio such as the Bürgenstock Resort and the Royal-Savoy hotel in Lausanne.

There is a mega trend of sustainable urban commercial developments sweeping across Asia, some call them knowledge cities. Projects in Iskandar Malaysia or the development, Tianjin Eco-City are generating intense interest among Asian sovereign wealth entities.

Singbridge International Singapore Pte Ltd, a sovereign wealth enterprise of Temasek Holdings, will jointly develop a business park in Guangzhou, China.

Guangzhou is the third most populous metropolitan area in China, shadowing Beijing and Shanghai.

Singbridge is partnering with Ascendas and the Guangzhou Development District (GDD). The actual location of the business park will be in Guangzhou Knowledge City which is located on a 123 square kilometer greenfield site. It is located 35km from the Guangzhou’s city center. It will be developed over a decade and costs are estimated at RMB 2.3 billion.

According to the press release, “Khazanah Nasional Berhad (“Khazanah”) and Temasek  Holdings (Private) Limited (“Temasek”) are pleased to announce the establishment of M+S Pte Ltd (“M+S”) and Pulau Indah Ventures Sdn Bhd (“Pulau Indah”).  Owned 60:40 by Khazanah and Temasek respectively, M+S will develop land parcels in Marina South and Ophir-Rochor in Singapore. Pulau Indah, a 50:50 joint venture between Khazanah and Temasek, will develop projects in Iskandar Malaysia in Johor.  These joint developments were supported by the Prime Ministers of Malaysia and Singapore in their Joint Statements of 24 May 2010, 22 June 2010, 20 September 2010 and 27 June 2011.

M+S develops two key sites in Singapore

M+S Pte Ltd will develop four land parcels in Marina South and two land parcels in Ophir Rochor, each as an integrated development.  An indirect wholly-owned subsidiary of UEM Land Holdings Berhad (“UEM Land”), a real estate company within Khazanah’s portfolio, and an indirect wholly-owned subsidiary of Mapletree Investments Pte Ltd (“Mapletree”), a Temasek portfolio company, have been appointed to oversee the marketing and development of the project at Marina South.  For the Ophir-Rochor site, UEM Land and an indirect wholly-owned subsidiary of CapitaLand Limited (“CapitaLand”), another Temasek portfolio company, have been appointed to oversee the marketing and development.

Khazanah and Temasek are both committed to the successful commercialisation of these land parcels, which will include office, residential, hotel and retail components.

The gross development value of the project with a permitted gross floor area (“Permitted GFA”) of up to 501,020 sqm is estimated at approximately SGD11 billion (RM27 billion), subject to design and development plans.

Pulau Indah develops two new sites in Iskandar Malaysia

Khazanah and Temasek have worked together since last May to identify suitable sites in Iskandar Malaysia for joint commercial development. Two sites, one in Medini North and the other at the Heritage Cluster in Medini Central, have been confirmed.

Pulau Indah intends to develop serviced apartments, a corporate training centre, and commercial, retail, residential and wellness-related offerings on these sites. Khazanah and Temasek are currently in discussions and negotiations with potential partners and operators for the various components to maximize the commercial potential of the location.

The gross development value of the Iskandar project with a Permitted GFA of up to 1,365,675 sqm is estimated at approximately RM3 billion, subject to design and development plans.

Planning and design works for the projects had commenced in 1Q/2011.  With the signing of these agreements today, the projects will move towards design and further implementation and delivery of the initial phases over the next five years.

Khazanah’s Managing Director, Tan Sri Dato’ Azman Hj Mokhtar, said: “We are honoured to be undertaking these exciting developments at these key sites in Singapore and Iskandar Malaysia with our counterparts from Singapore, Temasek Holdings.  The development in Iskandar with Temasek will be highly complementary and builds on the momentum of existing and planned projects in Iskandar Malaysia, in which Khazanah has been involved since 2006.  Both these projects mark our first joint development investment with Temasek, and we look forward to a strong and fruitful partnership in both Singapore and Iskandar Malaysia.”

Ms Ho Ching, Executive Director & CEO of Temasek, added: ‘Both the Khazanah and Temasek teams put in tremendous effort, working very closely together to develop the best ideas possible for our joint projects. We were also very fortunate to have the expert and highly professional support of leading real estate companies like UEM Land from Malaysia as well as Mapletree and CapitaLand from Singapore. I am also especially grateful for the guidance, advice and support of very experienced industry leaders who will guide the Singapore developments as key Board members of M+S.  I look forward to the successful development of the projects both in Johor as well as Singapore.’”

Source: Khazanah Nasional Press Release

The Government of Singapore Investment Corporation and the Australand Property Group have created a logistics joint venture called Australand Logistics.  The real estate joint venture will invest in industrial assets and will have a target investment size of AUD$450 million.  The initial term of the JV is 5 years and is expected use very little to no debt in its strategy.  The initial portfolio holds six completed assets and two properties under development in Australia.  The total value of completion is around AUD$220 million.[Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view site content.]

Georgia is a country with ripe agricultural land and located strategically by the Black Sea. The country’s soil and climate has made farming a very productive sector for the overall domestic economy. Crops such as corn, wheat, hazelnuts, citrus fruits, and grapes are dominant. Hassad Food, the sovereign wealth enterprise of the Qatar Investment Authority is on the lookout for agricultural investments. They recently made a visit to meet with the Finance Minister of Georgia. In addition, they also discussed about Qatari Diar’s possible investment in developing hotel properties in the country.

It might be a strategically convincing idea to partner with Qatar, as Georgia imports nearly all its required materials for gas and oil products.

Syria is undergoing domestic unrest and the current regime is heavily cracking down on dissenters. The security situation has made it thorny for foreign developers to continue investment projects. Qatari Diar is the real estate arm of the Qatar Investment Authority. They have temporarily stopped investment projects in Syria until the security situation clears up.

When the security situation improves Qatari Diar will resume real estate development operations in Syria. In the Syrian seaport city of Latakia, Qatari Diar is developing the Ibn Hani Bay Resort project which will cost around US$ 350 million. The luxury real estate project began in January 2010 and it stretches over 244,000 square meters on the Ibn Hani coast.

Fosterlane Management Corporation, the sovereign wealth enterprise real estate arm of the Kuwait Investment Authority has purchased a 34-story office tower in New York City from Hines. The building is at 750 7th avenue and has Morgan Stanley as a key tenant. The office tower was built in 1989 and earlier bought by Hines  from Morgan Stanley.

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Gulf sovereign wealth funds have provided lifesaving capital to a variation of economic silos. When the major banks needed money to increase their capital base, sovereign wealth funds bailed them out. Times have changed and the majority of Swiss banks have tighter lending standards. Now that Swiss banks are reluctant to lend money to medium-sized family run hotels, Qatar’s sovereign wealth enterprise is stepping in.[Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view site content.]

Yngve Slyngstad

One year ago in Europe and North America, real estate prices especially in core office and retail markets were very attractive for sovereign funds. The real estate core investment model has shifted into the expensive category in 2011; investors have begun crowding, pushing up purchase prices. Just recently in Singapore, we witnessed Mapletree Investments, a sovereign wealth enterprise of Temasek Holdings, IPO one of its commercial real estate trust units. Institutional real estate has resurfaced and global deal flow is steadily increasing. Norway’s sovereign fund is allowed to allocate up to 5% into institutional property assets ex-Norway.

In an April 15th Bloomberg interview, the CEO of Norges Bank Investment Management, felt in terms of investing in property markets, “there will be better buying opportunities after 2013.”

In fact, there seems to be little necessity in fulfilling the allocation of 5% in real estate in one year’s time as the sovereign fund looks out for prime properties at discounted valuations. Norway’s SWF had their first foray into the property markets by choosing a trophy asset in the UK from the Crown Estate. Norges Bank Investment Management is strategically targeting three main European property markets which are composed of: France, Germany, and the United Kingdom. Norges Bank will invest in the European real estate markets before it ventures in the US market.

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Mapletree Investments, a global real estate company owned by Singapore’s Temasek Holdings, was planning another IPO. This time for one of its commercial real estate portfolios. [Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view site content.]

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According to the press release, “TIAA-CREF and the Future Fund, an AUD$71 billion Australian sovereign wealth fund, today announced a new venture that will target co-ownership opportunities in real estate properties. As a first step, the Future Fund has taken an approximately 49 percent stake in 685 Third Avenue, which was previously purchased for USD$190 million by TIAA-CREF in 2010.

685 Third Avenue is a 33-story, 600,000 square foot office building in Midtown Manhattan between 43rd Street and 44th Street.  Currently vacant, the building is undergoing renovations including lobby and shop front improvements. TIAA-CREF and the Future Fund plan to pursue additional real estate opportunities over the next two years. Together, the companies will target core and core plus assets located in the CBD and Class A suburban regions of primary metropolitan areas in the US.

“TIAA-CREF is thrilled to partner with the Future Fund and complete our first transaction together. We believe 685 Third Avenue offers an excellent long-term investment opportunity and has the potential to generate significant value by attracting new tenants,” said Phil McAndrews, TIAA-CREF Managing Director and Head of Real Estate Portfolio Management. “We will continue to expand our real estate portfolio through targeted and strategic acquisitions.””

Read more: TIAA-CREF Press Release

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According to the press release, “Jefferies Group, Inc. and the Government of Singapore Investment Corporation (GIC) announced today that, through affiliates, they and LoanCore LLC, led by Mark Finerman, have formed Jefferies LoanCore LLC, a new joint venture commercial real estate finance company with $600 million in initial equity commitments that will be leveraged appropriately. Jefferies LoanCore will originate commercial real estate debt through a team of professionals led by Mr. Finerman, with the support of the broad real estate, investment banking and securitization capabilities of Jefferies, and the deep real estate and mortgage investment expertise of GIC Real Estate, the real estate investment arm of GIC.

“We are very excited to partner with GIC Real Estate to launch Jefferies LoanCore LLC, which further expands Jefferies’ investment banking and trading franchise by offering commercial real estate investors further access to capital,” said Richard B. Handler, Chairman and Chief Executive Officer of Jefferies Group. “Mark Finerman has an outstanding track record as a leader in the commercial real estate finance sector, and we are pleased to be working with Mark and his talented team.”

“We welcome the opportunity to establish a long-term partnership with Jefferies Group in commercial real estate finance,” said Dr. Seek Ngee Huat, President of GIC Real Estate. “We have worked successfully with Mark Finerman for several years and look forward to expanding our relationship with this further commitment.”

“Jefferies LoanCore expects to respond to the capital needs of commercial real estate owners and investors across the United States,” said Mr. Finerman, CEO of Jefferies LoanCore. “As our industry recovers from the disruption of the recent financial crisis, we expect Jefferies LoanCore to be a leader in providing creative capital solutions.”"

Source: Press Release

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According to the press release, “Norges Bank, which manages the Norwegian Government Pension Fund Global, today signed an agreement for the fund’s first real estate investment, the purchase of a 150-year lease on a 25 per cent stake in The Crown Estate’s Regent Street properties in London. The completion of the £452 million purchase, which was first announced in November, is expected on April 1. The fund was given a mandate in March 2010 to gradually invest as much as 5 per cent of its assets in real estate. The fund’s investments comprised about 60 per cent equities and 40 per cent fixed-income securities at the end of 2010.

“We’re very happy to have signed an agreement and look forward to a long and beneficial partnership with The Crown Estate,” says Karsten Kallevig, Global Head of Real Estate Asset Strategies at Norges Bank Investment Management (NBIM).

The partnership will give the fund 25 per cent of the properties’ net income, which primarily comes from office and retail space rent. The Crown Estate will retain 75 per cent of the income and will continue to be responsible for the management of the portfolio. Regent Street is one of London’s busiest shopping streets with retailers including Apple, Burberry, Banana Republic and Hamleys. The properties in the Regent Street portfolio, which consists of 113 buildings spread over 39 blocks, are owned by The Crown Estate on behalf of the United Kingdom. The Crown Estate has since 2002 been implementing a regeneration programme in Regent Street to transform it into an international destination for business and retail. Further development of the area is set to continue.”

Source: Norges Bank

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According to the Wall Street Journal, “Global Logistic Properties Ltd. (MC0.SG), a unit of Singapore’s sovereign wealth fund Government of Singapore Investment Corp. or GIC, is in talks to acquire a majority stake in China’s Airport City Development, Co. Ltd., people familiar with the situation said Tuesday. Airport City Development, which is 40%-owned by Beijing Capital International Airport (0694.HK), is the sole developer of air side cargo handling and bonded warehouse logistic facilities for Beijing Capital International airport.

“A deal is likely to be signed soon and an announcement could come within this week,” one of the person said.

Details of the transaction weren’t immediately available, but another person said that the acquisition could be through a combination of cash and shares. Of the cash component, GLP may pay around S$300 million for the stake.”

Read more: The Wall Street Journal

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The China Investment Corporation is seeing Manhattan as a yielding destination to park its capital. In recent years Europeans, Japanese, and Arabs have been one the largest clusters of foreign investors in New York City.[Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view site content.]

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The Vietnam News Agency reports, “CapitaLand Viet Nam Investments Pte Ltd (CVI) has entered into a US$200 million joint venture with Japan’s Mitsubishi Estate Asia Pte Ltd (MEA) and an affiliate of GIC Real Estate, the real estate investment arm of Government of Singapore Investment Corporation, to invest in prime real estate development projects in HCM City and Ha Noi. CVI, which is a wholly-owned subsidiary of CapitaLand (Viet Nam) Holdings Pte Ltd, will take up a 50-per- cent stake in the joint venture, while the balance will be held in equal proportions by MEA and the affiliate of GIC Real Estate.

MEA is a wholly-owned subsidiary of Mitsubishi Estate Company Limited. CVI will inject a pipeline of projects into the joint venture, while CapitaLand will undertake project management for these projects. The first project will be an approximately 34,000sq.m site located in HCM City’s Thanh My Loi Ward in District 2.

The first phase of this project will be a residential development that will offer 962 apartments supported by approximately 7,700sq.m of retail space.”

Read more: VNA

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Yngve Slyngstad

According to the press release, “Norges Bank, which manages the Norwegian Government Pension Fund Global, has agreed to buy a 150-year lease on a 25 percent stake in The Crown Estate’s Regent Street properties in London. The purchase price is expected to be £448 million, or approximately 4.2 billion Norwegian kroner. A final agreement and completion of the transaction is anticipated by the end of March 2011, giving the fund its first investment in real estate after the Norwegian government on 1 March gave permission to invest in the asset class.

“A move into real estate will strengthen the fund, which today is solely invested in stocks and bonds,” says Yngve Slyngstad, chief executive officer of Norges Bank Investment Management (NBIM).

Regent Street is one of London’s busiest shopping streets with retailers including Apple, Burberry, Banana Republic and Hamleys. The properties in the Regent Street portfolio, which consists of 113 buildings spread over 39 blocks, are owned by The Crown Estate on behalf of the United Kingdom. The partnership would give the fund 25 percent of the properties’ net income, which would mainly come from office and retail space rent. The Crown Estate would retain 75 percent of the income.

“The Crown Estate would continue to be responsible for the management of the portfolio, while NBIM would take part in significant capital decisions,” says Slyngstad.

The Crown Estate has since 2002 been implementing a regeneration programme in Regent Street to transform it into an international destination for business and retail. Further development of the area is set to continue. The fund got a mandate on 1 March to gradually invest as much as 5 percent of its assets in real estate through a corresponding decrease in fixed-income investments. Real estate investments will mainly be in unlisted real estate, well-developed property markets and traditional property types, initially in Europe. The fund’s investments consisted of 60 percent equities and 40 percent fixed-income securities at the end of the third quarter.”

Source: NBIM Press Release

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Sovereign wealth funds and other institutional investors are lukewarm when it comes to Asian real estate investment. Asian sovereign investors are becoming more risk averse to non-core real estate and dumping portfolios of non-core and opportunistic real estate.[Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view site content.]

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Abu Dhabi’s Mubadala Development Company (“Mubadala”) has today signed two collaboration agreements on a strategic partnership with 1Malaysia Development Berhad (“1MDB”) that could lead to significant increases in FDI in Malaysia.

The agreements have been signed with Mubadala Real Estate & Hospitality (MREH) and Mubadala Industry (MI). MI has agreed to assess the viability of an investment of up to seven billion United States dollars (USD 7,000,000,000) for the development of a major initiative in the aluminium sector based on hydro power in the Sarawak Corridor of Renewable Energy (SCORE).

The two state-owned companies are starting preliminary assessment work on the project, which will create more than 10,000 jobs during construction and another 2,000 specialist jobs.

MREH has agreed to collaborate with 1MDB to explore the potential joint development of key strategic projects within the Kuala Lumpur International Financial District (“KLIFD”), the 34.4 hectare development in Kuala Lumpur that is being led by 1MDB. The full scope of MREH’s participation in projects to be located within the KLIFD will be finalized in 2011 following completion by 1MDB of the KLIFD master plan.

Read more: 1MDB Press Release

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According to the Independent, “China’s biggest sovereign wealth fund is in talks to buy a stake in one of London’s tallest skyscrapers being developed by Britain’s largest property company.

The China Investment Corporation (CIC) has approached Land Securities about taking an equity stake of up to 25 per cent in the proposed “Walkie-Talkie”, the 500 ft tower at 20 Fenchurch Street designed by Rafael Vinoly. Land Securities won planning consent for the Square Mile site two years ago after a public inquiry sparked when English Heritage and others objected to its impact on the sight lines to St Paul’s Cathedral. The 36-storey building (down nine floors from the original plan) will cost an estimated £300m to build and is scheduled for completion in 2014.

It is nicknamed the Walkie-Talkie because of its top-heavy shape, designed to maximise high-rent floor space on the upper stories.

The FTSE-100 company entered into exclusive discussions with Canary Wharf Group to jointly develop the site in June. As part of the proposed deal, Canary Wharf would build the tower. These talks are still ongoing but it is thought that CIC, a wholly owned state company based in Beijing, has entered the negotiations.”

Read more: Independent

It was a deal of the decade, when the CIC piled cash into the ailing investment bank Morgan Stanley. Now the CIC is slowly selling shares as its investment’s stock price rebounded from the trenches, especially after the failed Morgan Stanley deal with Mitsubishi UFJ. The China Investment Corporation is always looking for the next greatest long term deal; in fact they have a whole unit dedicated for special investments.

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According to Emirates Business 24/7, “Mubadala Development Company and Pramerica Real Estate Investors, a unit of US-based Prudential Financial, have agreed to set up a company that will raise capital to fund and invest in real estate projects in Abu Dhabi and other international markets.

Mubadala Pramerica Real Estate Investors (Mubadala Pramerica REI), the joint venture, will be owned equally by the two companies and will be headquartered in Abu Dhabi.

“The joint venture will become operational soon, but we are not in a position to specify a date,” a Mubadala spokesperson told Emirates Business.

In a press statement, Waleed Al Muhairi, Chief Operating Officer for Mubadala, said: “By partnering with Pramerica, we’re bringing together one of the world’s leading real estate investment companies with our regional market expertise and knowledge. This is a compelling prospect for investors that want to participate in the current and future growth of the region.”

The joint venture, according to the spokesperson, will only raise capital to fund and invest in real estate projects and will not develop, or act as a developer of real estate projects.

“The JV will be contracting with real estate developers to build and develop the real estate projects it will invest into.”

Mubadala has already set up two other joint ventures for development purposes.”

Emirates Business 24/7