ADIA’s real estate investment pace slows

In its annual report, the preeminent sovereign wealth fund of the United Arab Emirates said it was focused on selling assets and refinancings as attractive global real estate opportunities become harder to source.

Abu Dhabi Investment Authority, the main sovereign wealth fund of the United Arab Emirates, has said the pace of its real estate acquisitions slowed in 2016 due to maturing property cycles around the world.

In its annual report, the investor said its real estate team was focused on asset and portfolio management initiatives, including selectively selling assets and securing attractive financing for properties identified for longer-term ownership.

In one example of this, in August, PERE reported that ADIA, alongside its joint venture partners, sold 2000 McKinney Avenue in Dallas for around $200 million to Hamburg, Germany-based Union Investment Real Estate.

In another, at the start of the year the sovereign wealth fund sold an office property in London to Poly Real Estate Group, a large state-owned Shanghai-based listed Chinese property developer for around £145 million.

Despite the investment slowdown ADIA said it remained positive on real estate as fundamentals remained firm and, broadly speaking, on an improving trend.
In its outlook, the investor said that heightened political uncertainty globally had not had a material impact on the market.

It said that investor demand for cash-flowing real estate assets remained healthy and would continue to expand, as both cyclical and secular forces attracted capital to the asset class.

ADIA pointed to investments in an office development in La Défense, the dominant office market in Paris, and a retail development in Macau as key property deals in 2016.

It said it was also able to take advantage of discounts in the Brazilian listed markets to acquire a controlling stake in BR Properties, which owns a large portfolio of office assets in the key markets of São Paulo and Rio de Janeiro.

However, notwithstanding an abundance of liquidity, ADIA noted that transaction volumes declined across most major markets in 2016, a trend it said was likely due to reduced available assets.

ADIA, which has an estimated $828 billion under management, looks to have between 5 percent and 10 percent of its assets invested in real estate. The asset class has been managed alongside infrastructure, which accounts for up to 5 percent of the fund’s portfolio, since the two departments merged six years ago.

ADIA’s global investment portfolio reported 20-year and 30-year annualised rates of return of 6.1 percent and 6.9 percent last year, according to the report, compared with 6.5 percent and 7.5 percent in 2015.