Sovereign Wealth Fund Direct Real Estate Investing is Making a Comeback

Posted on 09/13/2021

Large balance sheet global SWFs are making a comeback in the real estate sector as inflation rises and central banks maintain their support. Sovereign investors are financing platforms with real estate managers who have access to a unique deal flow. The Mubadala Investment Company, for example, is involved with Round Hill Capital on a strategy platform for Dutch residential investments. This partnership is aimed at some of the largest Dutch cities with large numbers of young professionals and families looking to take their first steps on the real estate ladder. Tech giants like Amazon.com, Inc., Microsoft Corporation, and Tencent Holdings Limited are creating the demand for more data centers and fueling the frenzy of internet growth and e-commerce habits. Another notable deal in 2021 is the acquisition of a significant minority stake in the Southeast Asian digital infrastructure platform EdgePoint Infrastructure by a subsidiary of the Abu Dhabi Investment Authority (ADIA). EdgePoint was founded by DigitalBridge Group, Inc. and focuses on the development, acquisition and operation of telecommunications masts, distributed antenna systems and related infrastructure in Southeast Asia. Another notable deal includes the establishment of Abu Dhabi-based Mubadala Investment Company, a joint venture with Crow Holdings to develop US $ 1 billion in Class A industrial real estate. Crow Holdings was originally founded by US real estate developer Trammell Crow, who has built a huge real estate empire. Housing, data centers and logistics are all critical issues for government investors in 2021 and likely 2022. In many cases, distressed real estate investments are left to the fund platforms and allocations to real estate funds for sovereign wealth funds.

Direct investments by Sovereign Wealth Funds in the real estate sector

Source: SWFI.com (SWFI Global Asset Owner Database)
INQUIRY: Direct investment. Equity bias. All types (transactions). Announced dates.
3rd quarter 2021 (annualized) * (1H 2021 + ((4th quarter 2019 + 4th quarter 2020) / 2)

The annals of real estate investments by government investors follow market cycles; however, some have acted contrary in some ways. With regard to office real estate, for example, Norwegian government pension fund Global has suffered a setback in unlisted real estate by investing in a 47.5% stake in an office property on One Memorial Drive in the city of Cambridge. This is despite the fact that the US office market is not recovering from the COVID-19 pandemic in terms of total sales volume. Ultimately, public funds seek sustained cash flows and returns in their preferred asset classes.

With regard to the east, sovereign wealth funds based in Asia and the Gulf region are watching the development of the urban Chinese real estate market and see if the Chinese government will provide sufficient support. Troubled China Evergrande Group may have to grapple with the country’s largest debt restructuring of all time. The risk is factored in as Evergrande’s US dollar bonds trade around 30 cents.

source https://www.bisayanews.com/2021/09/13/sovereign-wealth-fund-direct-real-estate-investing-is-making-a-comeback/