Recent weeks have seen a continuation of a theme seen in 2021, when state-owned investors (SOIs) piled record amounts of investment in real estate joint venture partnerships with developers. Deal volume and value surged in 2021 following a slump in 2020, when the uncertainties of the pandemic created a temporary slowdown and the signs are that the pace has not abated in the new year.

SOIs forge joint ventures in real estate to create large asset pools in partnership with a leading investor in the sector, who originates deals backed by the capital. This maybe preferable in entering a market segment or region where a sovereign fund lacks in-house capacity and experience and where partners have a proven track-record of delivering superior yields. Canadian public pension funds along with Singapore’s GIC and Dutch public pension fund manager APG have been the most enthusiastic investors in joint venture real estate partnership.

Global SWF has conducted a deep dive into the data from 2016 and found that the pandemic has had a major impact on the choice of real estate sector and this, in turn, has favored logistics platforms, particularly in emerging markets, led by ESR and LOGOS.

In January alone, Canadian public pension fund PSP signed a US$450 million logistics joint venture with Bridge, while Quebec’s CDPQ formed a multi-family joint venture in Chile with Greystar. Norway’s NBIM entered a US$600 million British logistics joint venture with Prologis.

The deals in the first three weeks of 2022 followed the trend seen in 2021 when SOIs piled an estimated US$22 billion into real estate platforms, of which 45% was channelled into logistics, a sector that has seen a surge in interest due to a radical shift in consumption patterns, assisted by e-commerce growth. Canadian public pension funds CPP Investments, CDPQ and OMERS along with Singaporean sovereign wealth fund GIC were dominant in building logistics platforms.

Asia was the focus of interest and naturally they turned to long-standing experts in the Asian logistics market. Asia’s leading logistics real estate manager ESR received the lion’s share of SOI investment, but Bridge and LOGOS also formed ventures with SOIs. Attention was concentrated on Australia, where funds could capitalize on the country’s infrastructure development, e-commerce trends and access to global markets.

Residential housing has also grown in importance amid healthy asset prices in developed markets, despite pressures on household income during the pandemic. In 2021, residential JV platforms received an estimated US$6.4 billion of sovereign capital, a 3.4x increase on the previous year and a record high. Global rental housing developer Greystar proved to be a favored partner of Canadian public pension fund CPP Investments which dominated the segment, with single family and multi-family platforms in the US and Brazil. European residential and student housing developer Round Hill also got significant backing in two major deals. In the Netherlands, it built on an existing partnership with Abu Dhabi’s Mubadala and brought in CDPQ to develop rental homes, while in the student accommodation sector it formed a EUR1 billion regional platform with CPP.

Office ventures were boosted with an estimated US$3.6 billion of sovereign capital, having seen negligible interest in sovereign partnerships in 2020. Nearly all the investment was in US platforms except for CPP forging an alliance in India with RMZ to back office developments in Chennai and Hyderabad. In the US, CPP and GIC teamed up with Boston Properties to establish a US$1 billion platform. Another major deal came in the life sciences property sector which saw CPP sign a deal to create a platform with Greystar, targeting an initial US$1.2 billion in investment opportunities.   

At the same time, sectors most impacted by the pandemic – retail and hotel portfolios – witnessed diminished interest among SOIs. These segments saw no new partnerships in 2020 and received some modest capital in 2021, but in historical terms the numbers were very low.