Sovereign Wealth Fund Institute

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

Sidenote: More Sovereign Entities are raising debt capital, leverage:  We have seen this also with Mubadala, Temasek, and many other Gulf Sovereign Vehicles.

Qatari Diar, a property arm of Qatar’s sovereign wealth fund, will issue a $3.5 billion bond denominated in dollars in the coming weeks with five and 10-year maturities, a source close to the matter said on Tuesday. The issue will come through a syndicate of local and international banks including HSBC, Barclays Capital, Standard Chartered and QNB Capital, the investment banking unit of Qatar National Bank, the source said.

Qatari Diar, which counts London’s Chelsea Barracks among its most high-profile overseas assets, holds a 45 percent stake in Qatar’s Barwa Real Estate company.

Qatar issued 10 billion riyals ($2.75 billion) worth of eight-year conventional and Islamic bonds with a coupon of 6.5 percent to local banks earlier in June.

Read more: Reuters

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Australian Business reports, “In 2020, the Future Fund will be Australia’s biggest property landlord as the $67 billion listed property trust sector cedes its dominance to big sovereign wealth funds and super fund investors. Among other big trends, the property industry will be grappling with population growth, an ageing population, climate change and the challenge to supply infrastructure. In Australia, the annual population growth rate doubled in the past 10 years to 443,000 in the year to June. At the same time, the country attracted 290,000 migrants in net terms.

“I don’t think that will significantly ease up,” demographer Bernard Salt says.

This month, Prime Minister Kevin Rudd announced state governments and local councils will have to agree to better standards of planning in capital cities to qualify for future federal infrastructure funding to ensure they can properly handle growth, with the population set to reach 35 million by 2049. In the corporate world, analysts expect big superannuation funds and the increasingly dominant sovereign wealth funds to become landlords of much more property. The race is already on for Australian property companies to snag these big-ticket investors as partners. Lend Lease chief executive Steve McCann and his team are in the box seat as retail property fund manager for Australia’s $64 billion Future Fund with a joint bid to take over ING’s unlisted $1.4bn retail fund.”

read more: Australian Business

According to the AP, “Abu Dhabi’s biggest sovereign wealth fund has bought more than 10 percent of the Hyatt Hotels Corp. shares floated by the iconic hotelier last month.

Chicago-based Hyatt disclosed the sale Monday in a filing with the U.S. Securities and Exchange Commission. The deal was made public on the same day oil-rich Abu Dhabi agreed to pump $10 billion in bailout funds into its struggling neighbor Dubai. The filing said the Abu Dhabi Investment Authority bought nearly 4.8 million, or 10.9 percent, of Hyatt’s Class A common shares. Its overall stake in the company is considerably lower, however, because the wealthy Pritzker family holds the bulk of other stocks known as Class B shares that give it voting control over the company.

ADIA spokesman Euart Glendinning confirmed the purchase Tuesday. He said the fund intends to remain a minority shareholder. Financial terms were not disclosed. Hyatt shares closed at $29.05 apiece Friday, the last trading day before the deal became public. At that price, ADIA’s stake is worth about $139.4 million. ADIA is the largest of several investment funds Abu Dhabi uses to invest its oil wealth. It is perhaps best known for agreeing to pump $7.5 billion in Citigroup Inc. in late 2007.

The size of its holdings has not been made public, but it is believed to be the world’s largest sovereign wealth fund. Estimates of its size have ranged from less than $400 billion to $875 billion and up.

Abu Dhabi, like Dubai, is one of seven semiautonomous sheikdoms that make up the United Arab Emirates, among OPEC’s top five oil producers. It serves as the federation’s capital, with control over the presidency and nearly all the country’s oil reserves. Hyatt raised $950 million last month when it floated 38 million Class A shares — the type bought by ADIA — in one of the year’s few initial public offerings. Additional Class A shares were made available to the bank’s underwriters. Hyatt was founded in 1957 by Jay Pritzker and first taken public in 1962. It later returned to private hands, where it remained for more than a quarter century until last month’s IPO. It owns, operates, manages or franchises 415 Hyatt-branded properties, including the Hyatt, Park Hyatt, Hyatt Regency and Grand Hyatt chains, in 45 countries.”

read more: AP

The Abu Dhabi Investment Authority said today that it has appointed Tom Arnold as Head of Americas, Real Estate, with immediate effect. Mr. Arnold, 51, will be responsible for developing and implementing ADIA’s real estate investment strategy in the Americas region. He will be based in Abu Dhabi and report to Bill Schwab, Global Head of Real Estate.

With a career spanning more than 25 years, Mr. Arnold joins ADIA from Cerberus Capital Management, where he was a Managing Director since 2003 with responsibility for the origination and execution of real estate, lending, and private equity transactions. Prior to this, Mr. Arnold spent five years at ING as a Managing Director and senior real estate acquisitions officer, overseeing portfolio management and coordinating financing facilities. He also previously served as a senior acquisitions officer and strategic asset manager at Credit Suisse and Salomon Brothers (now Citigroup). He began his career in the early 1980s as a lawyer specialising in securities, tax, and real estate matters.

Commenting on the appointment, Bill Schwab, Global Head of Real Estate at ADIA, said: “Tom is a highly respected investment professional with wide-ranging experience and deep relationships across the industry. His arrival will further strengthen our team and play a crucial role in the development of ADIA’s strategy in the important Americas region.”

Mr. Arnold said: “ADIA is a unique organisation with a well-deserved reputation as a prudent and sophisticated investor and trusted partner. In real estate, ADIA has been particularly successful in nurturing partnerships with other leading investors that are mutually beneficial while remaining consistent with its strategic vision. I feel very fortunate to be part of such a world class institution.”

read more: Abu Dhabi Investment Authority

Gulf Times reports, “Qatar Holding, a strategic and direct investment arm of Qatar Investment Authority (QIA), will extend debt finance to part fund Songbird Estates’ purchase of additional 8.45% equity in the London’s realty developer Canary Wharf Group (CWG). Songbird Estates, in which the Qatar Holding seeks to be one of the largest shareholders, has invested £112.5mn in buying another 54mn shares in CWG, a leading real estate and development company with more than 7mn square feet of office and retail space. The purchase of additional stake will increase the share of Songbird, which is incorporated in England and Wales, in the CWG to 69.3% from 60.8%.

‘Qatar Holding will be a leading participant in a new debt facility to help fund the purchase by Songbird Estates of the additional shares in CWG,’ said a spokesman of Qatar Holding, which has agreed to fully participate in the offering to the extent of its 14.8% stake in Songbird.

However, he did not disclose to what extent Qatar Holding will partake in the debt facility. The CWG is an integrated property development and investment entity focused exclusively on Grade-A office space and high retail facilities at the Canary Wharf Estate, a 97-acre development which is part of the Central London Office Market.

‘We fully support the management of Songbird in undertaking this transaction, which we believe is a good opportunity to create value for all Songbird shareholders,’ said Ahmad al-Sayed, CEO of Qatar Holding, which will also be the lead participant in the previously announced £275mn preference share issue.”

read more: Gulf Times

According to the Press Release, “Pursuant to CVM Instruction 358 of January 3, 2002, Cyrela Commercial Properties S.A. Empreendimentos e Participações (“CCP”), a commercial property development and leasing company with shares traded on the São Paulo Stock Exchange (BOVESPA) under the ticker CCPR3, informs its shareholders and the market in general that, on July 7, 2009, it entered into an agreement establishing the basis for a joint venture with BRCOMPROP DEVELOPMENT JV PRIVATE LIMITED, an affiliate of GIC Real Estate, the real estate investment arm of the Government of Singapore Investment Corporation (“GIC Real Estate”) and CPPIB US RE-A, INC, subsidiary of the Canada Pension Plan Investment Board, (“CPPIB”), with the purpose of acquiring, holding, developing, building, leasing, managing and selling assets in the retail, industrial and office real estate segment in Brazil (“Joint Venture”).

The investments of GIC Real Estate and CPPIB will be made through CCP18 DE MASTER LIMITED PARTNERSHIP, a company especially set up for this purpose pursuant to the laws of the state of Delaware, United States of America, with CCP Asset Management LLC, a whollyowned subsidiary of CCP, as its general partner (“Company”) being responsible for the allocation and management of the funds committed. The Company, in turn, will directly or indirectly invest, jointly with CCP, in specific purpose companies headquartered in Brazil, which will invest in retail, industrial and office real estate properties.

The investments committed by the parties to achieve the objectives of the Joint Venture total US$ 400 (four hundred) million and will be made in the ratio of 25% by CCP, 37.5% by GIC Real Estate and 37.5% by CPPIB.

This Joint Venture aims to combine CCP’s expertise in the Brazilian commercial real estate markets (office buildings, shopping centers and industrial facilities), with GIC Real Estate’s and CPPIB’s global investment expertise.

This partnership underlines CCP’s commitment to the Brazilian real estate market and its confidence on the growth prospects for the commercial property sector in the country.

read more: Cyrela Commercial Properties S.A – Press Release

Press release states, “CIC participation in Finance Facility CIC has committed to the Facility on the same terms as those announced to the market on 19 May 2009. To facilitate CIC’s participation, Macquarie Bank and its associates have sold down A$15m of their exposure which combined with CIC’s commitment of A$200m takes the final Facility size to A$485m. The Facility will not be increased in size beyond A$485m. Goodman and CIC have agreed to work in good faith towards a broader relationship between the two groups.

Greg Goodman, Group CEO of Goodman said: ‘We are very pleased with the support shown to the Group by CIC and are excited about the opportunity to partner with an institution of this calibre as we seek to grow our business globally. We view a relationship with CIC as highly strategic and believe that together we can capitalise on the significant opportunities created by current market conditions.’

The key terms of the A$485 million Facility are as follows:

9 month term expiring in February 2010, extendable for a further 15 months; and
Secured facility with covenants comparable to those in Goodman’s existing common
terms deed poll.

In conjunction with the Facility, additional Options will be granted over 255.3 million Goodman stapled securities with a two year term (Options). These additional Options are to be issued with a strike price of $0.40 and the lenders will share the two tranches of Options on a pro rata basis.

Approval from Australia’s Foreign Investment Review Board will be sought in respect of CIC’s participation in the transaction. The issue of options (apart from the first 120 million Options which were issued within placement capacity) will also be subject to security holder approval. In the event that the Options are not approved by security holders, the lenders under the Facility will be entitled to a cash amount from Goodman equivalent to the value of the Options as if they had been granted and were exercised. Further details of this grant will be distributed as part of a notice of extraordinary general meeting.”

read more: Goodman Press Release

Investment transparency is a concern for many governments and sovereign wealth funds. The Sovereign Wealth Fund Institute has noticed that many sovereign wealth funds are beginning to take steps to increase their transparency in recent months. The Alaska Permanent Fund is leading the way in investment transparency. They are one of the first sovereign wealth funds that publicly list their real estate holdings.

Sample Real Estate Investment Profile

120 East 87th Street: Retail
120 East 87th Street
New York, NY
Initial Investment Date: Feb 28, 1995
Percent Ownership: 100
Manager: L&B Realty Advisors, LLP

120 East 87th Street is a retail condominium comprised of portions of the first two floors and basement of a 14-story midrise residential condominium building. It has 78,024 square feet of leasable space and is located in an affluent area of New York.

source: Alaska Permanent Fund

read more: APFC – RE Holdings

The Independent reports that, “Norway’s sovereign wealth fund is on the verge of an $18 billion (£12.5bn) shopping spree for landmark British and American properties. Norges Bank, Norway’s central bank, which manages investments made from Norway’s vast energy surplus, is understood to be ready to make its first investments by the end of the summer. Paul Golding, the former Merrill Lynch banker who heads the fund’s UK arm, had been expected to start investing money for the fund last year. However Norges needed approval from the country’s government, which was not forthcoming during the financial crisis last year. Mr Golding’s three-man investment team is understood to have stepped up talks with property advisers in recent months ahead of getting the needed permission. Norges is likely to invest as a minority stakeholder in landmark buildings in both the UK and US while prices are low. If this proves successful, it will continue to invest in other markets.”

read more: The Independent

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Below are some notable transactions by SWFs making direct purchases.

It states: “The Abu Dhabi Investment Authority said today that it has appointed Bill Schwab as Global Head of Real Estate, based in Abu Dhabi, with immediate effect.

Mr. Schwab, 56, will be responsible for leading a dedicated team of professionals in managing and implementing ADIA’s global investment strategy in the real estate sector. He joins from J.P. Morgan, where he was a Managing Director in the European Real Estate Finance division with responsibility for the origination and execution of real estate transactions. Prior to this, Mr. Schwab spent 5 years at Deutsche Bank as a Director in the Real Estate, Capital Structure & Underwriting department. He also previously served as Chief Lending Officer in the Real Estate division at Goldman Sachs and held a number of senior posts within the real estate and construction industries.

Commenting on the appointment, Majed Al Romaithi, Executive Director for Real Estate at ADIA, said: ‘Bill is a highly regarded professional with broad knowledge and experience across all aspects of the real estate business and we are delighted to welcome him to the ADIA team. He will play an important role in guiding ADIA’s investment strategy in this exciting and constantly evolving sector.’ Mr. Schwab said: ‘ADIA has an excellent reputation as an established and sophisticated real estate investor with a focus on sustainable, long term returns. I am very excited to be working with such a high caliber team and contributing to ADIA’s continued success in the real estate space.’”

read more: ADIA Press Release

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