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DISMANTLE: Sovereign Wealth Funds Could Buy Parts of GE

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GE_eating2Getting early dibs, private equity giant Blackstone Group and San Francisco-based Wells Fargo signed agreements to acquire the majority of assets of GE Capital Real Estate, a unit of General Electric (GE), in a transaction value worth approximately US$ 23 billion. More financial assets are available for sale, as GE yearns to return to its industrial beginnings, focusing on wind turbines, jet engines and medical devices. In addition, GE is eager to get away from being lumped in with banks which are facing new regulatory laws. Under Dodd-Frank, the industrial conglomerate has been labeled a systematically important financial institution (SIFI). To assist in this complex and massive sales process, GE hired JPMorgan Chase & Co to be the lead on the financial asset disposition plan. Other bankers such as Goldman Sachs and Credit Suisse are assisting possible piecemeal sales of financial assets. Once the massive corporate restructure is final, GE capital should make up less than 10% of the company’s operating earnings – down from 42% in 2014.

GE Talks to Everyone, Even Sovereign Wealth Funds

Sovereign wealth funds could play a major role in acquiring some financial assets of GE, either directly or indirectly as a limited partner through a private equity fund. Sovereign investors were the white knights that bailed out banks such as UBS and Merrill Lynch during the subprime meltdown. According to GE Chief Financial Officer Jeff Bornstein, in a Bloomberg interview, the company had discussions with “a broad geographic spectrum” of suitors, including sovereign wealth funds, hedge funds and banks. GE has more than US$ 160 billion financial assets to sell. The financial advisors of GE have assisted in trying to find buyers for GE assets as well. As an investor group, sovereign wealth funds have over US$ 7 trillion in assets, eclipsing the Canadian pensions in assets. The large sovereign wealth funds, such as the Abu Dhabi Investment Authority, GIC Private Limited and Norway’s SWF have large balance sheets. Just this week, Norway’s sovereign wealth fund partnered with Prologis, through their joint venture, and bought a mega portfolio of U.S. industrial and logistical real estate for US$ 5.9 billion.

On the April 17th, 2015 GE First Quarter Earnings Call, Scott Davis, managing director and head of global industrials equity research at Barclays Capital, commented, “I was intrigued by a couple of comments that you made but Jeff Bornstein, the comment you made on incoming interest into the asset sales. Give us a sense of — I think the question really is, give us a sense of your availability to sell those assets quicker than you laid out in your timetable, meaning are the books out, do you have — if the sovereign showed up tomorrow could you hand them the keys and a few months later it is you can get the deal done? Or is there some gating factors that could limit the timing?”

US$ 74 Billion – U.S. Commercial Lending and Leasing Unit

First up for sale is GE’s US$ 74 billion U.S. commercial lending and leasing unit. The unit provides financing and leasing for companies such as supermarket outlets, vehicle dealerships and the like. Some interested buyers are, Mitsubishi UFJ Financial Group Inc., Apollo Global Management, Wells Fargo & Co. and, yes, Blackstone Group.

Apollo and Blackstone could give Wells Fargo a run for their money, as private equity firms are pressured to use committed capital for investments – good amount is backed by pensions and sovereign wealth funds through LP commitments. In addition, GE could sell the portfolio piecemeal to gain a higher valuation.

SWFI First Read, September 21, 2018

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U.S. Public Becomes More Aware that Gmail Scans Emails

Alphabet is a major stock holding for sovereign wealth funds and large pensions. Search giant Google is under fire for allowing third-party partners and companies, like Return Path Inc and other advertisers, to share data from Gmail accounts. Many experts and tech observers already knew this, but more people in the public are becoming aware of Google’s practices when it comes to privacy. Google disclosed in a letter to U.S. lawmakers this finding. The Wall Street Journal reported that in some instances, app companies were able to read people’s emails in order to improve their algorithms. In 2017, Google said they would stop scanning all of one’s Gmail messages for the goal of personalized ads.

GPIF Infrastructure Exposure Almost Reached 200 Billion Yen in March 2018

Japan Government Pension Investment Fund’s (GPIF) exposure to infrastructure real estate was 196.8 billion JPY at the end of March 2018. At that period, 57% of the exposure was to the UK, 15% was to Australia, 15% to Sweden, 10% to Spain and 3% to Finland. 21% of GPIF’s infrastructure portfolio was linked to airports versus 27% to ports.

AIMCo-backed sPower Closes $498.7 Million Bond Deal

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Iceland Contemplates a Sovereign Wealth Fund

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The Government of Iceland is looking to possibly form a sovereign wealth fund to stabilize the country from unforeseen shocks to the national economy. The Iceland government released a statement saying, “The state’s contributions to the Fund will be equivalent to new revenues from publicly owned power production companies which are expected to accrue in the coming years.”

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CBRE Global Wins First GPIF Global Real Estate Mandate

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Japan Government Pension Investment Fund (GPIF) awarded its first global real estate mandate by hiring CBRE Global Investment Partners Limited. This is a global core real estate fund-of-funds separate account. Overseeing this mandate as a gatekeeper is Asset Management One Co., Ltd., which is a unit of Mizuho Financial Group. This RFP was launched in April 2017.

CBRE Global Investment Partners is the multi-manager arm of CBRE Global Investors.

In addition, on August 8, 2018, GPIF hired two custodians for short-term investments. These custodians are Trust & Custody Services Bank, Ltd and The Master Trust Bank of Japan, Ltd.

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