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THE SIGNIFICANCE OF THE SIGNIFICANCE OF PROPERTY IN PROPERTY IN
SOVEREIGN WEALTH SOVEREIGN WEALTH FUNDSFUNDS
GRAEME NEWELLUniversity of Western SydneyandANDREW BAUMUniversity of Reading
June 2009
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SWF CONTEXTSWF CONTEXT Definition of SWF; criteria Types ; purpose; funding sources
– natural resource reserves – goods/services reserves– pension fund reserves
Development of SWFs-1950s - 1970s/80s -1990s -2000+
SWF market size ??? Major SWFs ; regions; growth; significance
-ADIA - GIC -GPF -KIA-CIC -Temasek -DIC - QIA
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SWF CONTEXTSWF CONTEXT
Strategies; management Transparency; disclosure
-asset allocation?? Concerns re: SWF activities Santiago Principles Differences re: SWFs
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PURPOSE OF PAPERPURPOSE OF PAPER
SWF activity : 2000-08 Property @ SWF activity: 2000-08 Case studies: major SWFs(9)
– property activities Future development of SWFs
– property issues
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SWF INFORMATION SOURCESSWF INFORMATION SOURCES
Sovereign Wealth Fund Institute Monitor SWF transactions :2000-08
– # >1150 - $ > $ 250 billion Real Capital Analytics : 2007-08
-Global property transactions– # > 57,000 - $ > $ 1.7 trillion
SWF websites
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SWF ACTIVITY : 2000-08SWF ACTIVITY : 2000-08
Major new SWFs– CIC - NWF - QIA– Dubai World
Move to higher risk investments 2000-08 activity
– #, $, players– sectors– $ flows– OECD Vs emerging markets– minority Vs majority stakes
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SWF ACTIVITY: 2008SWF ACTIVITY: 2008
# = 175 @ $128bn Q1@$68bn Q2@$12bn Q3@$15bn Q4@$35bn Factors : GFC, falling commodity prices Regions; sectors Impact of financial services, private equity stakes
– GIC, CIC, ADIA, KIA,QIA, Temasek– Citibank, UBS, Merrill Lynch, Carlyle, Blackstone– $45bn @ bank losses
Total losses @ up to $700bn @18-25% assets Strategic shift : domestic focus
– Q1: 88%/12% – Q4: 57%/43%
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SWF PROPERTY ACTIVITY :2000-08 2000-08: # @18% (#2); $ @19% (#2) Typically 8-10% property allocation Q4 :2008: # = 12 @ $5.3bn Strategies re: property ; sophisticated
– direct – REITs –JV– co-investment – clubs – private equity– equity @ r.e. co - debt finance – capital commitments @ PD
Major property players– GIC –ADIA – KIA –QIA– Temasek – Dubai World – Mubadala
Role of SWEs and holding companies
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2007 : PROPERTY @ SWFs2007 : PROPERTY @ SWFs
Major players– Dubai World (#14) @ $5.5bn– GIC (#21) @ $3.5bn– Istithmar World (#44) @$1.3B
Major deals– Dubai World (#1) ~ US development site– GIC (#18) ~ UK retail– GIC (#21) ~ Australia retail– GIC (#34) ~ UK office
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2008: PROPERTY @ SWFs2008: PROPERTY @ SWFs
Major players– Dubai World (#26) @$2.2bn– Qatari Real Estate (#31) @$1.9bn– GIC (#39) @ $1.7bn– Temasek (#41), ADIA (#74), KIA(#98)
Major deals (often via JV)– KIA/QIA (#1) ~ GM Building, NY– Qatari Diar RE (#4) ~ Chelsea Barracks, London– KIA (#26) ~ Willis Building, London– ADIA (#28) ~ Chrysler Building, NY– Dubai World (#34), GIC (#35), Dubai World (#48)
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GICGIC
Property section @1982 Property @ 10% ; $ = ??? ; sophisticated Top 10 ; > 200 properties; > 30 countries > 150 staff @ 7 offices globally Direct, indirect, JV, debt, private equity Stakes @ r.e. companies
– British Land – Brixton – Great Portland– GPT – Liberty International
Role of Temasek re: property– separate SWF
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ADIAADIA
Established 1976 Property @ 5-8% Direct (65%), private equity (30%), listed (5%) Property SWEs
– ADICo – Tasameen –Tamweeiwen Europe
Bill Schwab: global head of property :2009 Chrysler Building @ $800M @ June ‘08 New funds @ $40-$50bn p.a.
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DUBAI WORLDDUBAI WORLD
Property and tourism SWEs
– Nakheel – Istithmar World– Leisure Corp – Limitless – DP World
MGM Mirage stake
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MUBADALA DEVELOPMENT CORPMUBADALA DEVELOPMENT CORP
Abu Dhabi @ 2002 Property development ✓ Capitala : 51% JV John Buck International : 51% JV Kor Hotels : 50% Abu Dhabi developments
– MGM Grand – Mina Zayed Waterfront– Rosewood Abu Dhabi – Somarah Square– uni, diabetes centre, cancer clinic
Malaysia development– $1.8bn JV -3K acre resort
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OTHER SWFsOTHER SWFs
CIC– 2007 -property activities– reorganised investment departments @ 2009 – future role @ property✓✓
Norway GPF– 1990; equities @ 45%; bonds @ 55%– 2008: permitted to invest in direct property– expect 5% property allocation
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Alaska Permanent Fund– 1976 - $31 billion– 10% property - >60 properties (US)
KIA– 1953 -property @ 6% - JV activity– SWEs : Kuwait Real Estate Investment Consortium
:St Martins QIA
– 2005 - property ; JV activity– SWEs : Qatari Diar, Delta Commercial Properties
OTHER SWFsOTHER SWFs
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SWF FUTURE DEVELOPMENTSSWF FUTURE DEVELOPMENTS Part of global financial markets✓ Sophisticated investment strategies✓ Lessons for newer SWFs Increased transparency and accountability Local focus
– Reinvest in local economy; liquidity– Energy, infrastructure, environment
Role of CIC Revised growth scenarios = $5-6T @ 2012
– Slower growth - Local demands– Passive strategy - Liquidity
Property implications