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Adia and Sofaz are the two most active SWF real estate investors right now

by Paola Dezza

If in their homelands they like to show off their wealth, in our cities the Middle Eastern financial players can only be glimpsed behind the tinted glass windows of their rented cars that take them around to their various appointments, rarely with banks (their institutions of reference are all in Switzerland) and almost always with real estate consultants and asset managers who act as the go-between for their acquisitions in Italy.

For many years now, it is in Italy that emirs, sheiks and sultans have been hunting for high-level real estate, attracted especially by trophy assets.

“Trophy” buildings that must have as essential features a central location, must be already bringing in income and have also, but not always, a historical value. That's why until now hotels have been the most purchased buildings.

As far as offices, the attention turns to modern, latest-generation complexes. But, in this case, our portfolio is lacking, given that the development activity has been completely blocked in the last eight years of the real estate crisis.

The first player among sovereign funds to arrive in Italy (in real estate) is, however, Asian and is GIC, the sovereign fund of Singapore (Government of Singapore Investment Corporation) that has purchased in 2008 50% of the RomaEst Shopping Centre with Ing real estate, becoming then last year the owner of 100% of it, by buying the remaining 50% from CBRE Global Investors. GIC has real estate investments in 40 countries.

The Middle Eastern funds -- the sovereign fund of Qatar and the Abu Dhabi Investment Authority (Adia) are the most active -- must face competition from giants of the likes of Blackstone, Cerberus, Tristan, Apollo that have until now operated from a more opportunistic point of view but are beginning to look for core income assets, to remain in Italy with at least a medium-term outlook.

Qatar also is the sovereign fund that has scored two major deals: the acquisition of the Costa Smeralda hotels from Colony Capital and the acquisition of the Milan's Porta Nuova complex from Hines.

The two most active funds today are Adia and Sofaz, the sovereign fund of Azerbaijan, looking for shopping opportunities. According to rumors, Adia is doing the due diligence for the INPS building in Via Melchiorre Gioia while the Azerbaijani fund made an offer for the Chamber of Commerce building in Via Meravigli in Milan.

Even the two Korean sovereign funds are looking around -- the National Pension Services and KIC -- while the Chinese sovereign funds, such as CIC (China Investment Corporation), remain cautious, operating in the shadow of the country’s more aggressive private groups, like the giant Fosun, today the owner of the former headquarters of UniCredit in Piazza Cordusio in Milan.

It is of little importance that sometimes the performance is not high or the price is not the best, today what counts is securing the best asset on the market. This is the perspective of Katara Hospitality, the Qatar company focused on hotels, which has recently purchased the Excelsior Hotel in Rome for €225 million and is ready for some more shopping.