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CPPIB to Develop Office Towers in Sydney

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According to the press release, “Canada Pension Plan Investment Board (CPPIB) announced today that it has formed a joint venture with Lend Lease Corporation and the Australian Prime Property Fund Commercial (APPFC) to develop and hold two institutional quality, premium grade, energy-efficient waterfront office towers at the Barangaroo South Project in Sydney’s Central Business District (CBD) in Australia.

The joint venture is committing A$2 billion (C$2.08 billion) with CPPIB committing 50% or A$1 billion (C$1.04 billion) of the equity for the project. Lend Lease and APPFC will each commit 25% to the joint venture.

The Barangaroo South Project will be CPPIB’s first direct office investment in Australia and its largest investment in a single real estate asset to date.

“This is an excellent opportunity to invest in a high quality, iconic commercial waterfront real estate development alongside Lend Lease, one of the region’s top developers and APPFC, an aligned, local institutional partner,” said Graeme Eadie, Senior Vice-President, Real Estate Investments for CPPIB. “We will be able to gain a significant exposure in Sydney’s Central Business District through a premium-grade office development offering the tenants highly efficient and environmentally sensitive facilities. This investment supports our real estate strategy to acquire premium, long term assets in key global markets.”

“Lend Lease is delighted to be working in partnership with CPPIB and APPFC and its investors to be delivering Sydney’s most sustainable high rise office towers,” said Steve McCann, Group Chief Executive Officer and Managing Director, Lend Lease. “Barangaroo South demonstrates Lend Lease’s ability to provide access to high quality scarce development opportunities to its institutional investment partners. We thank our investors for their support and funding and look forward to a long and successful relationship on this flagship project.”

The joint venture investment in the Barangaroo South Project, which is part of a major new extension of the Sydney CBD, involves the development of two premium-grade office towers of 41 floors and 38 floors totalling 165,773 square metres (1.78 million square feet). The two towers will offer a retail component comprising 6,840 square metres (73,625 square feet) of retail space. Completion of both towers is expected in 2015. Under certain circumstances, the joint venture may also develop a third tower at Barangaroo South in the future.”

Read more: Press Release

Maiden Lane I Ends, Federal Reserve Aims to Shrink Balance Sheet

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The U.S. Federal Reserve’s balance sheet has been set to decline automatically since 2017, as the central bank has been liquidating funds from its US$ 4 trillion in Treasury bonds and mortgage-backed securities. As holdings matured, the Fed refrained from reinvesting them. This amounts to US$ 40 billion in monetary tightening monthly. Meanwhile, interest rates have slowly, and continuously, risen. The maturation of these Fed assets could exert upward pressure on long-term yields.

Mortgage rates, applications, and home sales have been falling, likely due to the rising rates. While rates are still historically low, U.S. President Trump has criticized the rate hikes. However, the Fed has no interest in changing course, and rates are set to continue to rise. According to Fed meeting minutes, “The Chairman suggested that the Committee would likely resume a discussion of operating frameworks in the fall.”

The size and content of the Fed balance sheet going forward will be a point of discussion for Chairman Jerome Powell. While there is no end in sight for the Fed’s plans to tighten economic policy, changing conditions may warrant further examination. With the U.S. stock market thriving, there is no indication that tightening has had a material impact on the economy. However, conventional wisdom asserts that the Fed will raise rates “until something breaks.” Market commentators have also suggested that, in the event of an emergency, the Fed will have a harder time stepping in due to the size of its balance sheet. A large part of the Fed’s monetary strategy is based around communications, and Fed-watchers have made a habit of hanging on every word. The Fed announced a shrinking balance sheet well in advance, and made gradual moves in that direction. The process has been smooth thus far. The Fed’s tightening will reach its peak, US$ 50 billion, in October. It is unclear exactly how much stimulus is still needed in the economy to reach the Fed’s 2% inflation target. The Fed’s easing policies have been criticized for the lopsided benefits they provided, more for Wall Street than Main Street. However, the easing will reduce their role in the market.

The End of Maiden Lane I

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QIA Gets a New CEO

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Sheikh Abdullah Bin Mohammed Al-Thani exited as CEO of the Qatar Investment Authority (QIA). He has been appointed as minister of state by Amiri Order No. (4) of 2018.

Mansoor bin Ebrahim Al-Mahmoud is appointed as the new CEO of QIA. He held positions in various organizations such as CEO of Qatar Development Bank and worked at Qatar Museums.

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SWFI First Read, September 19, 2018

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QIA Eyes Investment in Chinese Lender Lufax

The Qatar Investment Authority (QIA) is in talks about a possible investment into Shanghai-based Lufax, one of China’s largest online lenders. The seller of the possible stake is China’s Ping An Insurance (Group) Co. Ltd. Lufax’s official name is Shanghai Lujiazui International Financial Asset Exchange Co. Ltd.

Wealth Funds Back Hotpot Giant

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