Arab SWFs slow to return to overseas real estate

ENAR

After a period of sustained activity characterized by high-profile investments and significant appetite for trophy assets, sovereign wealth funds (SWF) in the Arab world felt the repercussions of the global financial crisis, and significantly reduced their real estate investment activity. The drop in oil prices in the second half of 2008 led Arab governments to tighten petrodollar cash allocations to SWFs, as reduced fiscal surpluses had to be used in priority to complete infrastructure spending and salvage domestic economies. With almost no exceptions, SWFs from the Gulf refrained from investing in overseas real estate markets for the past 12 months. This situation prevailed up until June 2009, when two SWFs executed two high profile transactions in their preferred destination, the London real estate market. The Oman Investment Fund acquired 75 percent of a major City of London development in a joint venture with Hammerson in a staggering $733 million transaction.