SWF Weekly News Roundup: Hospitality and Hospital Deals in Spotlight

May 29, 2015 by Loch Adamson

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In the news this week, ADIA and QIA continue their hunt for luxury hotels while GIC makes a big investment in Brazil.

Hotels — ADIA Checks In, GIC Out

Sovereign wealth funds’ appetite for luxury hotels continues. This week the $589 billion Abu Dhabi Investment Authority (ADIA) bought two hotels in Raleigh, North Carolina from local developers Concord Hospitality Enterprises and Kane Realty. ADIA paid approximately $80 million for the Renaissance Raleigh North Hills and $23 million for the Hyatt House Raleigh North Hills.

ADIA is also reportedly ready to compete with the $304.4 billion Qatar Investment Authority (QIA) for the storied Grosvenor House hotel in London. Indian conglomerate Sahara bought Grosvenor House in 2010 for £470 million ($732.5 million) but lost control of the property to the Bank of China earlier this year after defaulting on its debts. ADIA and QIA are reported to have made rival offers of between £600 and £625 million for the hotel, which is currently leased by Bethesda, Maryland-based Marriott International.

This isn’t the first time the two funds have competed for a landmark London hotel. Both submitted bids for the Maybourne Hotels Group, which controls three of the British capital's most recognizable properties — Claridge’s, the Berkeley and the Connaught — before QIA sealed a deal worth over £1.5 billion for Maybourne last month.

Not every fund is joining the the luxury hotel hunt. GIC, Singapore’s $314 billion sovereign wealth fund, is selling out of the hotel sector as it seeks to book big profits on sky-high valuations. This week the fund offloaded the Westin Sydney hotel to a joint venture between Singaporean developer Far East Land and the Hong Kong-listed Sino Land Company for A$445.3 million ($347.5 million). GIC had bought the hotel in 2002 for A$160 million.

GIC Buys Brazilian Health Care

GIC made two big investments in health care this week. Filings with the Brazilian Securities, Commodities and Futures Exchange show the fund bought an undisclosed stake in Brazilian hospital operator Rede D'Or São Luiz for around 3.2 billion reals ($1 billion). GIC appears to have moved to take advantage of the government’s recent decision to allow foreign investment in the nation’s health care sector for the first time. Still, the investment comes as a surprise, given that GIC’s recent approach to health care investments led many to believe it was deemphasizing hard assets such as hospitals in favor of consumer-oriented businesses and research-intensive biotech.

More typical is GIC’s apparent interest in Chinese pharmaceutical company 3SBio Inc., which makes drugs that are used to treat blood disorders. GIC will reportedly provide $30 million to the firm as a cornerstone investor at its initial public offering (IPO) on the Hong Kong Stock Exchange. 3SBio, which is owned by Beijing-based Citic Private Equity Funds Management, the venture capital arm of Chinese state-owned conglomerate Citic Group Corp., is aiming to raise around $712 million at the IPO.

Two Funds Publish 2014 Financials

It’s the start of annual report season for sovereign wealth funds, and this week saw two state investors publish their financial results. Bahrain Mumtalakat Holding Co., the island kingdom's sovereign wealth fund, disclosed revenues of 1.2 billion Bahraini dirhams ($3.18 billion) over 2014, up 11 percent from the BD 1.1 billion figure recorded for 2013. Its overall assets reached BD 4.2 billion ($11.1 billion) as of December 31, 2014. Profits were also up 65 percent — or BD 181.1 million, compared with BD 109.4 million over 2013.

The Bank of Botswana, meanwhile, published its 2014 report, which contains some information on the Pula Fund, the sovereign wealth vehicle that it manages. The report shows the fund's assets increased to 54.75 billion Botswanan pula, up from BWP 49.33 billion the previous year; in dollar terms the fund's value rose slightly to $5.76 billion from $5.65 billion. The Bank of Botswana does not appear to have changed the fund's portfolio composition over the period — bonds and equity comprise 55 percent and 43 percent of the portfolio respectively, with the balance in other assets, as they did at end-2013.

The report also provides details on the Botswanan government's plans to introduce a so-called fiscal rule requiring it to save 40 percent of revenues from the country's diamond exports in a fund for future generations, although it is not clear whether this new savings plan will involve the Pula Fund or an entirely new vehicle.

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