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Sovereign wealth investment on the rise in US

An uptick in real estate investment activity by SWFs in 2008 may indicate a long-term investment trend, including helping to fill the debt financing void, according to a Deloitte report.

Sovereign wealth funds may be pursuing “larger, more active and more strategic” US real estate opportunities, according to a report from accounting firm Deloitte.

A number of sizeable direct investments in properties were made in 2008, Deloitte said in its latest report called “Sovereign Wealth Funds: Real Estate Partners in Growth?”. That trend, the report said, indicated that many sovereign investors were keen to target direct real estate purchases in the US.

In June 2008, Abu Dhabi Investment Authority purchased a 75 percent stake in the Chrysler Building, in New York, for $800 million, while at the same time Qatar and Kuwait joined Boston Properties and Goldman Sachs in the $3.95 billion purchase of the GM Building and three other properties previously owned by Harry Macklowe.

Deloitte said other deals also indicated interest by sovereign wealth funds in partnering with real estate firms on broader global initiatives. Abu Dhabi's investment vehicle, Mubadala Development, purchased a 25 percent stake in Chicago-based John Buck Company and created an Abu Dhabi-based unit to develop regional projects in March 2008.

Also in March, the Government of Singapore Investment Company (GIC) formed a $600 million joint venture with Bethesda, Maryland-based Host Hotel & Resorts to invest in hospitality-related real estate in Asia and Australia.

In addition to investing in real estate firms and real estate assets, the report predicted that sovereign wealth funds would move into hybrid debt financing or alternate investment commitments to private equity and other real estate investors to fill the void created by stagnant credit markets.