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THE SIGNIFICANCE OF PROPERTY IN SOVEREIGN WEALTH FUNDS. GRAEME NEWELL University of Western Sydney and ANDREW BAUM University of Reading. June 2009. SWF CONTEXT. Definition of SWF; criteria Types ; purpose; funding sources natural resource reserves goods/services reserves - PowerPoint PPT Presentation
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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
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
SWF CONTEXTSWF CONTEXT
Strategies; management Transparency; disclosure
-asset allocation?? Concerns re: SWF activities Santiago Principles Differences re: SWFs
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
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
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
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%
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
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
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)
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
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.
DUBAI WORLDDUBAI WORLD
Property and tourism SWEs
– Nakheel – Istithmar World– Leisure Corp – Limitless – DP World
MGM Mirage stake
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
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
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
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