They said it
“Without rental assistance, the real estate industry is being mandated to shoulder an unrecoverable financial burden that could lead to the greatest rental housing crisis of our lifetime”
A bond-like bet
Private equity giant Apollo Global Management’s consortium investment in the Abu Dhabi National Oil Company’s $5.5 billion non-oil and gas strategic infrastructure portfolio can be read in a number of ways. It is a real estate deal surely; an infrastructure deal possibly; and, perhaps, a geopolitical move by the United Arab Emirates to establish more international partnerships on home soil. How do we see it? As a non-controlling, minority-stake investment subject to a 24-year master lease agreement, we regard the deal as akin to a fixed-income property play underpinned by the relative stability of demand for ADNOC’s primary business – oil and gas.
Private real estate is ready to crash the Asia-Pacific data center party. While investment in the region’s data storage facilities has been on the rise – up seven-fold in the past two years per Cushman and Wakefield – opportunities for private equity real estate managers have been limited. Hong Kong-based Gaw Capital is determined to change that with a $1.3 billion opportunistic fund focused solely on Chinese data centers. With the backing of the Abu Dhabi Investment Authority, the platform may be the first mega fund to target the market but it likely will not be the last.
Land rich, cash poor no more
Pandemic-driven distress is private real estate’s gain. As economic pressures mount during the ongoing health crisis, one way for companies to free up cash is by selling their underlying property. Private equity titan KKR has capitalized on this to bolster its investment approach in Japan, scooping up real estate from Nissan and Hitachi, according to a report from the Financial Times (paywall). Hirofumi Hirano, KKR’s head of Japan, told the paper his firm will seek similar opportunities with railways, manufacturers and other corporations whose core function is not real estate ownership.
For the first time in nearly a decade, Asia-Pacific investors were not the most active group in the London office market.
Office equity in tranches
With flexible workspace once again becoming increasingly relevant, the great office valuation conundrum takes another twist. As PERE explores in a deep-diving analysis this week, there remains a variety of ways to price offices that offer significant proportions of flexible space. One that caught our eye was a packaged return comprising income from a management agreement with the flexible space provider and the more traditional lease income from the building’s other tenants. The different underwriting required to price the constituent parts of such an investment feels somewhat similar in construct to the whole loans commonplace in credit deals.
Open-end core diversified real estate funds are continuing to see an exodus from investors interested in more targeted vehicles. The Ohio Police & Fire Pension Fund has requested more than $180 million from three ODCE funds, adding to the $65 million it redeemed last year. The $15 billion pension has requested a full, $86.4 million redemption from Jamestown Premier Property Fund, as well as partial redemptions of $50 million apiece from Heitman American Real Estate Trust and the JPMorgan Strategic Property Fund. OPF has said it plans to re-invest its capital in industrial and apartment strategies, following a trend we covered extensively last December.
The Canada Pension Plan re-affirmed two international strategies last week. First, the $330 billion pension fund added one of the top multifamily managers in the world into its Brazilian apartment platform. South Carolina-based Greystar Real Estate Partners will join a 1 billion real ($188 million; €160 million) joint venture between CPP and Cyrela Brazil Realty launched last year. Targeting apartments that appeal to middle- and high-income renters, the strategy is a unique play for institutional capital for a country more popular with office and industrial investors. See our coverage of that topic here.
CPP also renewed its partnership with GLP in Japan by committing ¥25 billion ($235 million; €200 million) to the Singaporean manager’s new Japan Income Fund. The open-end vehicle will target large-scale logistics properties in the country. CPP’s relationship with GLP in Japan dates back to a 50-50 joint venture launched in 2011; the pension will use proceeds from that partnership to seed the firm’s latest offering.
This week’s investor meetings
Tuesday, September 8
Wednesday, September 9
- State of Wisconsin Investment Board
- Alameda County Employees’ Retirement Association (ACERA)
- City of Fresno Retirement Systems
- City of Tucson Supplemental Retirement System
- Connecticut Retirement Plans and Trust Funds
- Tulare County Employees Retirement Association
- Los Angeles County Employees’ Retirement Association
- Massachusetts Pension Reserves Investment Management Board
- Oregon State Treasury
- San Bernardino County Employees’ Retirement Association (SBCERA)
- San Francisco Employees’ Retirement System
Thursday, September 10
- Kentucky Retirement Systems
- Nebraska Investment Council
- New Mexico State Investment Council
- Oklahoma City Employee Retirement System
- South Carolina Retirement System
- Tacoma Employees’ Retirement System
Friday, September 11
- Colorado Public Employees’ Retirement Association
- Indiana Public Retirement System
- Michigan State University
- State Universities Retirement System of Illinois
- Surrey County Pension Fund
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