ADIA Pursues Goldman Sachs Hotel Portfolio

(May 27, 2011) — Abu Dhabi’s sovereign wealth fund is investing $475 million in a Goldman Sachs hotel portfolio, the Wall Street Journal is reporting.

The deal is part of a broader restructuring for Goldman Sachs’ Whitehall Real Estate Funds, which is one of the banking giant’s largest hotel portfolios. Deutsche Bank will also refinance the debt through a $975 million loan.

The purchase by the sovereign wealth fund reflects renewed confidence in real estate investments and heightened faith in a rebound in travel demand following the recession.

Similarly, in February, the Government of Singapore Investment Corp.  offered to pay $1.5 billion to purchase five resorts that include Grand Wailea Resort Hotel & Spa in Maui, Hawaii, and the Doral Golf Resort & Spa in Miami. The resorts filed for bankruptcy on February 1.

Other institutional investors have also revealed flocking to property in anticipation of a rebound. On Thursday, the $108 billion Teacher Retirement System of Texas (TRS) awarded LaSalle Investment Management a second $200 million mandate to invest in property around the world. Earlier this year, the head of one of Canada’s most active global investors said that it is eyeing US commercial property. David Denison, chief executive of the Canada Pension Plan Investment Board (CPPIB), which oversees $140 billion in assets for Canada’s national pension plan, told the Wall Street Journal that he has witnessed a spike in the availability of commercial real estate in the US, and that he is expecting that trend to continue.

Additionally, the California Public Employees’ Retirement System (CalPERS) reported that it is expected to revamp its $15.4 billion real estate portfolio, targeting mainly domestic, core or stable income-producing real estate, run by managers in separate accounts. The $226 billion fund reported that it is looking to allocate around $2 billion to real estate deals in 2011 with a new strategy of more reasonable returns after its real-estate portfolio lost nearly half of its value — more than $10 billion — from July 2008 to June 2009. The move reflects a trend among funds to pursue real estate more conservatively after dismal property returns in recent years.