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.
Data Collective led a US$ 15 million Series A round into Salt Lake City-based Fortem Technologies, Inc., a company that works on solutions that can detect, identify and classify drones in real time to maintain airspace safety. Other investors in the round include Boeing, Mubadala Investment Company, Manifest Growth, New Ground Ventures and Signia Venture Partners.
Ibrahim Ajami, Head of Mubadala Ventures said in the press release, ” Mubadala is excited to work with Fortem and its outstanding leadership team to help grow its business to new markets.”
Ajami added, “We strongly believe the TrueView radar is essential to maintain a safe airspace for both the aircraft and the critical infrastructure on the ground.”
The Ireland Strategic Investment Fund (ISIF) and CIC Capital Corporation – a sovereign wealth enterprise (SWE) of the China Investment Corporation – announced the formation of a joint €150 million fund targeting high-growth Irish technology firms looking to expand into Chinese markets, as well as a special emphasis on Chinese companies hoping to set up shop in Ireland as a base for their European operations.
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The Council of Institutional Investor’s spring conference for 2018 – held this week in Washington D.C. at the Omni Shoreham Hotel – was packed with member-hosted panels, where nearly 400 of the top investment professional, regulators, and corporate governance experts gathered together to share their insights and engage in forward-looking discussions on how to drive a multi-stakeholder approach to responsible investment over the long-term.
Sovereign Wealth Fund Institute (SWFI) had the opportunity to attend several breakout sessions, including one presented by Maryland-based Institutional Shareholder Services that sought to address one of the most pressing challenges facing institutional investors today: How can environmental, social, and governance (ESG) criteria help drive voting at the board level? Moderated by Georgina Marshall, Head of Global Research at ISS, panelists provided a diverse array of perspectives on how to harness ESG considerations as an effective decision-making tool.
For Bonnie Saynay, Global Head of Responsible Investments at Invesco, fostering an environment conducive to communication with investment teams using a “player-coach” model is critical. Moreover, Saynay warned investors of thinking too broadly on ESG considerations, and to instead focus in on the criteria that is most important to them as an organization, and to then tailor their stewardship practices to match those priorities: “If everything is important, nothing is important,” she said.
Clare Payne, head of corporate governance for North America at Legal & General Investment Management, highlighted the importance of procuring the latest ranking data from a number of different providers, as well as how to develop one’s own internal system for scoring so as to cut through the clutter and provide a contextualized framework for making investment decisions on your own terms.
Remuneration is the name of the game for Robbie Miles, Vice President and ESG analyst at Allianz Global Investors. Amid the ever broadening scope of influence that responsible investment commands, Miles urged attendees to work with their managers on mandates that link compensation to the long-term performance of the fund, as well as long-term holding periods.
Wrapping up the panel was Stu Dalheim, Vice President of Shareholder Advocacy at Calvert Research Management, advocated for diversity at the board level across a number of different metrics – including ethnicity, gender, and professional backgrounds – in order to reflect the reality of their client base, as well as provide an apparatus for robust debate and adaptation in an ever-changing business environment.
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