Sovereign Wealth Funds Forestall Real-Estate Investments As COVID-19 Pandemic Bites

Sovereign Wealth Funds Forestall Real-Estate Investments As COVID-19 Pandemic Bites

Sovereign Wealth Funds Forestall Real-Estate Investments As COVID-19 Pandemic Bites

President Trump elicited jeers from New York City's remaining residents Thursday night when he called their city a "ghost town" during a lengthy riff on the myriad problems created by COVID-19-inspired lockdowns. But a mountain of data shows that Manhattan rents and property prices have tumbled to their most affordable levels in years.

But even more so than residential real estate, commercial real estate has taken a huge hit in the months since the outbreak, as office head counts dwindled and once thriving commercial areas in places like London became veritable ghost towns, so much so that the British government briefly encouraged finance types to return to their offices in Canary Wharf as the shops that depended on their foot traffic struggled.

But on the high end of the CRE market, sovereign wealth funds, which have been an active buyer of real estate in cities around the world, but especially in places like New York City and London, likely won't be making a return any time soon.

A blog post from the Sovereign Wealth Fund Institute offers more details below:

Direct Sovereign Wealth Fund Transactions – U.S. Real Estate Sector

Filter: Sovereign Wealth Funds. Type: Deal, New Security Issue, Open Market. No fund commitments. Sector: Real Estate. Country: United States

NOTE: For Logistics, included Industrial REITs. 2020 data is ongoing.

The coronavirus pandemic that swept across America in February and March 2020 had a material impact on direct real estate investing by sovereign wealth funds. Cash-rich sovereign investors were paralyzed in their direct investments during this time period, compared to previous years of annual growth in direct property allocations. Sovereign investors are cautious on catching a falling knife in the office and residential real estate sectors, versus the logistics sector – a key beneficiary of the e-commerce theme. A notable deal in 2020, includes GIC Private Limited’s type up with Bill Gates’ Cascade Investment, L.L.C. in becoming major investors in Columbia, Missouri-based StorageMart.

Pre-pandemic, a cadre of Asian and Gulf sovereign funds were active in a wide range of property assets in the United States. For example, on December 12, 2019, Singapore’s GIC Private Limited and NYSE-listed real estate investment trust RPT Realty formed a US$ 244 million retail joint venture. GIC spent US$ 118.3 million to purchase a 48.5% stake in five retail assets in Florida, Missouri, and Michigan and committed up to US$ 200 million of additional capital to the venture for future deals. In the same season in 2019, Marriott International Inc. sold the St. Regis New York for US$ 310 million to the Qatar Investment Authority (QIA).

Furthermore, direct deals in European properties by sovereign wealth investors has come to a near halt compared to other years.