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SWFs hit the pause button on real estate buying

High-profile real estate acquisitions by sovereign wealth funds slowed in 2019 as the institutions focused more on disposals.

High valuations and cycle concerns have prompted sovereign wealth funds globally to reduce their buying activity and instead sell some of their holdings to benefit from current pricing levels. This trend has been the most detectable among Asia-Pacific state investors. On the direct front, these investors in the region were net sellers in Q3 2019, disposing of $1.78 billion worth of assets while making no acquisitions, according to data provider Real Capital Analytics.

The scant buying activity this year was also evident in PERE’s research for the top transactions by sovereign investors globally over the past 12 months. Indeed, all the major acquisitions happened in the last quarter of 2018 and the only two 2019 deals were disposals.

 

Raffles City The Bund, Shanghai

Buyer: GIC and Raffles City China Investment Partners III, a CapitaLand fund

Seller: Shanghai International Port Group

Price: 12.8bn yuan ($1.8bn; €1.6bn)

What to know: The Singaporean SWF and a fund managed by Singaporean conglomerate CapitaLand’s joint purchase of Shanghai’s tallest twin towers was one of the year’s biggest single asset purchases in China. The mixed-use project, comprising two 50-story Grade A office towers linked by a shopping mall, is expected to open in phases starting in H2 2019. China has been a key focus for GIC and this landmark asset was in line with its long-term investment strategy.

 

Mixed-use development, Seoul

Buyer: National Pension Service of Korea, KKR and IGIS Asset Management

Seller: A consortium led by Korean engineering firm Daor E&C

Price: $1.9bn

What to know: South Korea’s NPS was the majority investor in this joint venture acquisition of a mixed-use development project in October 2018. According to PERE reports, NPS’s $500 million equity commitment comprised the whole preferred equity portion and a portion of common equity.

 

79 avenue des Champs-Elysées, Paris

Buyer: Norges Bank Real Estate Management

Seller: Groupama Group

Price: €613m

What to know: In December 2018, the Norwegian fund acquired a 100 percent interest in the central Paris retail and office property, comprising 77,500 square feet of retail and 33,368 feet of office space. Like Norges Bank Real Estate Management’s previous Paris asset purchase last November, this asset would be unencumbered by debt and there was no financing involved in the transaction.

 

Coca-Cola Building, New York

Buyer: Private investor consortium led by developer Michael Shvo

Seller: Wafra Capital Partners and Nightingale Properties

Price: $909m

What to know: The soft-drink giant’s iconic Fifth Avenue building was acquired by Wafra Capital Partners, an investment firm owned by the Public Institution for Social Security of Kuwait, and Nightingale Properties for $909 million in August. Wafra and Nightingale sold the property to a private investor consortium in just one month.