Sovereign Wealth Fund CIC Bids for Harvard's Property Portfolio
The Wall Street Journal reports: China Investment Corp, the world's richest sovereign wealth fund, aims to acquire stakes in six real estate funds held by Harvard University.
CIC reportedly plans to offer about $500 mil. for the holdings in a major step into the troubled U.S. commercial property market.
The deal would follow commitments that CIC, China's $300 bil. fund, has purportedly made to invest $1 bil. each in funds managed by Brookfield Asset Management and Cornerstone Real Estate Advisers.
The deals reflect a broader advance by CIC to deploy capital after largely staying on the sidelines amid the global financial crisis. Holding more capital than any other investor globally, China Investment Corp has increased the proportion of assets allocated to higher-risk assets.
The move also contrasts with the general retreat from commercial real estate. American institutional investors, like Harvard, are struggling with large investments made in the sector during the boom years.
Terms of the Harvard deal weren't available, but over the past 12 months, real estate funds have been offered for as much as 80 percent below net asset value, according to industry experts.
CIC is looking to boost exposure to U.S. real estate in a way that avoids the political and public-relations backlash that often accompanies foreign investment in high-profile U.S. assets.
Commercial property today is particularly appealing to foreign investors because values are low and more than $1 tril. of property debt is set to mature in the next five years. That is causing huge headaches for U.S. creditors and landlords, but it means opportunities for cash-rich investors looking to fill funding needs and rack up handsome returns.
Other foreign investors are also looking to take advantage of declined values in U.S. property. In the second quarter, investors from South Korea, Canada, Kuwait, the Netherlands and other countries acquired about $2.2 bil. of skyscrapers and other properties in the U.S., more than five times the amount seen a year earlier, according to research firm Real Capital Analytics.
The inflow of foreign investment still pales in comparison to the levels seen from 2003 to early 2008. For example, overseas investments totalled about $8.7 bil. in the third quarter of 2007 alone, the peak of the property market.
View the full article on The Wall Street Journal: Sovereign Wealth Fund CIC Bids for Harvard's Property Portfolio
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Posted by: Matthew Stone