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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.

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Presentation on theme: "THE SIGNIFICANCE OF PROPERTY IN SOVEREIGN WEALTH FUNDS GRAEME NEWELL University of Western Sydney and ANDREW BAUM University of Reading June 2009."— Presentation transcript:

1 THE SIGNIFICANCE OF PROPERTY IN SOVEREIGN WEALTH FUNDS GRAEME NEWELL University of Western Sydney and ANDREW BAUM University of Reading June 2009

2 SWF 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 SWF market size ??? Major SWFs ; regions; growth; significance -ADIA- GIC-GPF-KIA -CIC-Temasek-DIC- QIA

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7 SWF CONTEXT Strategies; management Transparency; disclosure -asset allocation?? Concerns re: SWF activities Santiago Principles Differences re: SWFs

8 4th Quarter 2008 LMTI ratings

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11 PURPOSE OF PAPER SWF activity : SWF activity: Case studies: major SWFs(9) – property activities Future development of SWFs – property issues

12 SWF INFORMATION SOURCES Sovereign Wealth Fund Institute Monitor SWF transactions : – # > $ > $ 250 billion Real Capital Analytics : Global property transactions – # > 57,000 - $ > $ 1.7 trillion SWF websites

13 SWF ACTIVITY : Major new SWFs – CIC - NWF- QIA – Dubai World Move to higher risk investments activity – #, $, players – sectors – $ flows – OECD Vs emerging markets – minority Vs majority stakes

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22 SWF ACTIVITY: 2008 # = $128bn 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 – bank losses Total up to assets Strategic shift : domestic focus – Q1: 88%/12% – Q4: 57%/43%

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25 SWF PROPERTY ACTIVITY : : (#2); (#2) Typically 8-10% property allocation Q4 :2008: # = $5.3bn Strategies re: property ; sophisticated – direct – REITs –JV – co-investment – clubs – private equity – r.e. co - debt finance – capital PD Major property players – GIC –ADIA – KIA –QIA – Temasek – Dubai World – Mubadala Role of SWEs and holding companies

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28 2007 : SWFs Major players – Dubai World $5.5bn – GIC $3.5bn – Istithmar World Major deals – Dubai World (#1) ~ US development site – GIC (#18) ~ UK retail – GIC (#21) ~ Australia retail – GIC (#34) ~ UK office

29 2008: SWFs Major players – Dubai World – Qatari Real Estate – GIC $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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31 GIC Property 10% ; $ = ??? ; sophisticated Top 10 ; > 200 properties; > 30 countries > offices globally Direct, indirect, JV, debt, private equity r.e. companies – British Land – Brixton – Great Portland – GPT – Liberty International Role of Temasek re: property – separate SWF

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41 ADIA Established % Direct (65%), private equity (30%), listed (5%) Property SWEs – ADICo – Tasameen –Tamweeiwen Europe Bill Schwab: global head of property :2009 Chrysler June ‘08 New $40-$50bn p.a.

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43 DUBAI WORLD Property and tourism SWEs – Nakheel – Istithmar World – Leisure Corp – Limitless – DP World MGM Mirage stake

44 MUBADALA DEVELOPMENT CORP Abu 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

45 OTHER SWFs CIC – property activities – reorganised investment 2009 – future property ✓✓ Norway GPF – 1990; 45%; 55% – 2008: permitted to invest in direct property – expect 5% property allocation

46 Alaska Permanent Fund – $31 billion – 10% property - >60 properties (US) KIA – % - JV activity – SWEs : Kuwait Real Estate Investment Consortium : St Martins QIA – property ; JV activity – SWEs : Qatari Diar, Delta Commercial Properties OTHER SWFs

47 SWF 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 = 2012 – Slower growth - Local demands – Passive strategy - Liquidity Property implications


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