With $42 billion-plus of assets, the Qatar Investment Authority is easily one of the private real estate world’s most important institutional investors.
The sovereign wealth fund, third in this year’s PERE Investor 50 ranking to be published at the start of next month, has regularly made headlines for one marquee deal or another. Among them is a $622 million investment in the company behind New York’s Empire State Building, the £1.5 billion ($1.99 billion; €1.69 billion) purchase of London’s Harrods department store and, more recently, the £2.6 billion privatization of Canary Wharf Group, the biggest landlord in London’s skyscraper district east of the City.
Today, the fund, estimated to have $300 billion-plus of assets across classes, is New York’s ninth biggest property owner with 10.7 million square feet, according to data group CoStar. In London, the 21.5 million square feet of property on its books even outstrips that of the UK royal family.
It is its high-profile presence that makes its inactivity in the market these days so noticeable
It is its high-profile presence that makes its inactivity in the market these days so noticeable. As far as Real Capital Analytics, the real estate transactions data house, can see, the QIA’s investment activity has dropped off a cliff: the state fund deployed almost $6 billion in 2016 and has invested more than $3.2 billion per year since 2012. This year, however, the number is around $775 million. We are only two months from year-end.
Predictably, senior private real estate executives are asking questions of the QIA, particularly in light of the ongoing Gulf diplomatic crisis. The country is effectively being commercially choked by a cohort of neighboring countries and, as multiple media outlets have deduced, a growing dependence on its sovereign wealth fund to keeping its economy ticking along is a fair prediction.
The QIA declined to speak with PERE, despite multiple attempts to make contact. But in the absence of a stated position on current investing policy, the market is making its own conclusions. One Asia-based senior broker familiar with Qatar’s $2.45 billion purchase of the Asia Square office tower in Singapore last year admits to not seeing the state fund active across the region in 2017. QIA passed on its first option to buy the scheme’s second tower, which was eventually sold to local property firm CapitaLand in September.
The picture might be different in Europe, where a London-based broker at one of the big property services firms told us he has witnessed QIA bidding on assets in the region. He also pointed to today’s record high prices, reasoning the state fund likely could not justify competing with certain other investors for assets. Nevertheless, his firm was one of two just appointed to sell Credit Suisse’s Canary Wharf headquarters for almost £500 million earlier this month. QIA does trade assets. But it is nevertheless interesting that it would sell in one of the locations it had previously been aggressively aggregating a strategic stronghold.
QIA regularly acquires property solo. But often it participates in clubs alongside like-minded institutional partners, which makes what a third broker had to say more alarming. He confided he had been instructed by investors not to present transactions involving the QIA. Whether or not to be seen to be taking sides or because they represent nations in direct conflict with Qatar, transacting with the country is seen by some as taking a position on the row itself.
Qatar’s quarrel is with countries including Saudi Arabia, the United Arab Emirates, Bahrain and Egypt, as well as a number of smaller nations – and some of these countries have active state funds. As one German real estate investment manager told us at the recent EXPO Real conference in Munich: “If you have a Qatari investor, you won’t have a Saudi investor too. You have to make a choice.”
These are uncertain times for one of private real estate’s most historically active institutional investors. In the absence of communication, private real estate executives are left piecing together the big picture for the QIA: and that looks like an investor somewhat curtailed right now.