2nd Quarter 2013 - Real Estate & Infrastructure

September 27, 2013 by Loch Adamson

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In the second quarter of 2013, real estate and infrastructure investments accounted for $4.7 billion (54 percent) of sovereign wealth funds’ total expenditures, down 23 percent from $6.1 billion in the first quarter. Typically, sovereign wealth funds are attracted to core real estate assets, such as high-status commercial properties with secure rental incomes, and established utilities in Europe and North America. In the second quarter, however, they didn’t make a single investment in emerging-markets real estate or infrastructure. Between April and June sovereign wealth funds only completed eight property and infrastructure deals.

Funds that have traditionally been active investors in real estate and infrastructure, such as the Qatar Investment Authority (QIA) and China Investment Corp. (CIC), took a break in the second quarter to analyze and reorganize their investments.

Norway’s Government Pension Fund Global (GPFG) picked up the slack. The world’s largest sovereign wealth fund, which had $724 billion in assets under management as of June 30, 2013, spent the most on real estate. In a single $1.6 billion deal, the fund bought 50 percent of a European commercial property portfolio belonging to San Francisco–based real estate investment company Prologis. (GPFG had announced the purchase in December 2012.) This investment represented almost half of the total that sovereign wealth funds allocated to real estate during the quarter.

As a new investor in real estate, GPFG is trying to shift 5 percent, or $36 billion, of its portfolio into property. But by June 30 real estate investments only amounted to 0.9 percent, or about $6.5 billion, of the Norwegian fund’s total assets.

Sovereign Wealth Fund Real Estate and Infrastructure Investments by Region, Second Quarter 2013


Source: Sovereign Wealth Center

The usually discreet Abu Dhabi Investment Council was active in real estate during the second quarter, investing a total of $558 million in two deals. In partnership with London-based property developer Finchatton, the council acquired the former U.S. Navy building in London’s Grosvenor Square, with each partner taking a 50 percent stake. It also bought four shopping malls in Australia for $366 million through Sydney-based asset manager Challenger.

QIA subsidiary Qatar Holding appeared less active than usual, but it didn’t seem fazed by the abdication of the emir of Qatar in June. Qatar Holding finalized two Italian deals during the second quarter: a €285 million ($368 million) investment in commercial property in Milan and the acquisition of the luxury Four Seasons Hotel Firenze in Florence for €150 million.

Sovereign wealth funds made just three foreign infrastructure investments in the second quarter. The Abu Dhabi Investment Authority (ADIA) allocated the most to these assets, investing an estimated $1 billion with a consortium that bought two Australian ports: Port Kembla in Wollongong and Port Botany in Sydney.


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