SOFAZ starts investing in real estate funds

By Aynur Karimova

Azerbaijan's state oil fund SOFAZ, which accumulates and manages the energy-rich country's oil and gas revenues, has started investing in real estate funds.

SOFAZ told Trend that the share of investments that can be made in real estate has been increased from 5 to 10 percent.

"Direct investments were supposed to make up the first stage of SOFAZ's investment strategy on real estate, and the Fund continues this activity successfully. Both the cash inflows generated from these investments and positive price difference make an important contribution to the profitability of the overall investment portfolio," SOFAZ said.

Progress on ensuring the high diversification of direct investments in real estate is evident and SOFAZ is already represented in majority of the important markets.

"The Fund aims to achieve portfolio diversification by investing in real estate with low or average risk," SOFAZ noted. "Before making these investments, an ultimate goal of SOFAZ was to create highly-structured portfolio, reflecting a number of directions. SOFAZ also started investing in real estate funds. These investments will be an important tool for improving profitability of the State Oil Fund by creating great opportunities both in terms of geography and status of construction (finished or under construction)."

SOFAZ was established in 1999 with assets of $271 million. Based on SOFAZ's regulations, its funds may be used for the construction and reconstruction of strategically important infrastructure facilities, as well as solving important national problems.

The main goals of the State Oil Fund include accumulation of resources and the placement of the fund’s assets abroad in order to minimize the negative affect on the economy, the prevention of "Dutch disease" to some extent, promotion of resource accumulation for future generations and support of current social and economic processes in Azerbaijan.

Investing in real estate was and continues to be one of the most revenue-generating fields. It is the safest kind of investment in the world. It cannot be lost or stolen, but, if needed, can be granted on lease or sold for good money.

SOFAZ also used this practice by investing in real estate abroad. It has already purchased Gallery Actor, a mixed-use office and retail complex located on Pushkin Square in Moscow for $133 million, an office complex in London's West End for £177.35 million and a property in Paris for €135 million, and Pine Avenue Tower A worth $447 million in Seoul.

The Fund has also acquired landmark retail property Kirarito Ginza in Tokyo, Japan for 52.3 billion yen jointly with Mitsubishi UFJ Trust and Banking Corporation, and agreed with the sovereign-wealth funds of Abu Dhabi and Qatar to invest a combined 350 million euros to buy and develop three separate properties in Milan.

These properties are stable sources of income for the budget. It is expected that Azerbaijan can earn huge revenues from granting them on lease or selling them if needed.


Aynur Karimova is AzerNews’ staff journalist, follow her on Twitter: @Aynur_Karimova

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