In September this year, Norway’s sovereign wealth fund, in one giant swoop paid US$ 1.5 billion for minority interests in two Boston properties and the former Citigroup Center in Manhattan. The amount of capital floating en route for core real estate is astonishing, more and more sovereign funds are allocating toward properties. In fact, for public institutional investors, real estate is one of the top sectors of direct investment.
The Growth of Direct Sovereign Wealth Fund Transactions
Source: Sovereign Wealth Fund Transaction Database – Data in Billion USD
Real Estate Figures: Sovereign Wealth Fund Transaction Database Data
According to the Sovereign Wealth Fund Transaction Database, comparing the period of September 30, 2014 going back 12 months, total direct public investor transactions in real estate were US$ 36 billion compared to US$ 23.22 billion for transactions starting at September 30, 2013 going back 12 months. Limiting the database universe to sovereign wealth fund direct transactions exclusively, by comparing figures in similar periods, the figures are US$ 29.11 billion for 2014 versus US$ 21.15 billion for 2013. Currently, with regard to the Sovereign Wealth Fund Transaction Database, sovereign wealth funds make up the majority of transactions, thus the number of total public institutional investor transactions in properties should be much higher.
Looming 2014 Sovereign Wealth Fund Trends in Real Estate
1. More Joint Ventures, Finding Local Partners
2. Tax Issues, Large Minority Interests
3. Other Key Cities, Besides Gateway Cities
4. Luxury and Hotel Properties
5. Indian Real Estate (Modi)
A resilient second wave of Asian institutional capital is bypassing London, flooding bits of continental Europe. In addition, Gulf sovereign wealth funds such as the Kuwait Investment Authority, Qatar Investment Authority and the Abu Dhabi Investment Authority have been active investors in continental Europe. This year, Constellation Hotel Holdings, controlled by the Qatar Investment Authority (QIA), agreed to pay €330 million for the InterContinental Paris – Le Grand and allocated €60 million for future hotel renovations. This can also be said of the large Canadian pension investors like the CPPIB and OMERS.
Sovereign wealth funds and pensions are at risk of a supply drought in core properties. With higher real estate fund commitments and deployment amounts, an unprecedented level of demand is being created by large public institutional investors. This trend could be exacerbated if U.S. defined contribution retirement accounts make the push into real estate assets.
Private equity firm BC Partners hired Goldman Sachs Group Inc. and JPMorgan Chase & Co. to advise on the sales of Acuris. Acuris is a collection of financial news and data sites, which includes Mergermarket, Dealreporter, and Debtwire. In 2017, BC Partners sold around a 30% stake in GIC Private Limited.
Before the rebranding to Acuris, Mergermarket was part of The Financial Times Group until 2013 when it was sold off to BC Partners.
Aflac Inc. is an American insurance company founded in 1955. The company is the biggest provider of supplemental insurance in the United States. Aflac also has major operations in Japan.
In December 2018, Japan Post Holdings (JPHLF) signaled it was spending US$ 2.64 billion for a 7-8 % stake in Aflac. The goal is that, in four years time, Aflac will become an affiliate of Japan Post. Japan Post hopes to accomplish this by becoming the largest voting shareholder of the company. The world’s 13th largest company, with 400,000 employees, Japan Post needs to expand to chase further growth, mainly because Japan Post expects the postal business to decline. Diversification is seen as the optimal route to long term stability for the holding company. Japan’s economy is worrying. Japan’s aging population means that many insurance companies are facing a shrinking customer base, Japan Post settled on a plan to expand overseas.
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The Russian Direct Investment Fund (RDIF) and the Development Agency of Serbia, also known as Razvojna agencija Srbije, reached an agreement to work together to identify attractive investment projects to strengthen bilateral economic ties and increase investment flows between Russia and Serbia. Russian capital and businesses are keen on investing in Serbia.
In addition, the two countries signed an agreement to cooperate on civil nuclear energy, according to state-owned Russian reactor builder Rosatom (Rosatom State Nuclear Energy Corporation). Rosatom continues to expand it business of nuclear cooperation deals in a wide number of countries.
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