NEW YORK CITY-Commercial real estate tops the list of industriesin which US decision makers would like to see sovereign wealthfunds invest, yet at the same time those decision makers take aless favorable view of the funds in the current downturn. That’sone of the findings of a global survey conducted by Hill &Knowlton among "elites" in seven markets, and the company’s Jim Coxtells GlobeSt.com that the wealth funds may need to do someimage-polishing.

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"US awareness tends to be fairly low, especially as compared tosome of the developing countries," says Cox, VP of Hill &Knowlton’s corporate practice. "So this is a sort of a missedopportunity for people who hold the properties and are looking forbuyers."

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Additionally, Cox says, "we found that depending on who thebuyer was—which sovereign wealth fund and what part of the worldthey’re from—the attitude varied considerably from ‘fine, bringthem on in’ to skepticism." Norway’s sovereign fund, for example,rates a warmer welcome than those of Algeria, Nigeria and Botswana.There’s also a tendency to be suspicious of the political motivesof sovereign funds in Russia or China, the survey found.

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"One of the challenges, depending on the type of investment orwhich country it is, is to have some more communication andpackaging to switch that around," says Cox. "Some of the fundsunderstand the business and want to be visible in ways that attractthe right opportunities. Others don’t communicate as well, and whenthey don’t, there’s a suspicion that their investments are just anextension of political policy."

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He describes a "burden of communication” among the funds. "Evenfor people that deal with them, it’s important that they explainthe deal in the right way," Cox says. "Where we’ve found hazards inthe past is when a deal was a surprise because it wasn’t explainedwell or was misunderstood."

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Conducted by Hill & Knowlton and Penn Schoen Berland, thesurvey discovered "gaps" in communication that sovereign funds havean opportunity to address. "There’s also a chance in the US,particularly for people in real estate, to explore sovereign wealthfunds, get to understand them a little better and see them aspotential buyers or potential investors in projects."

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The currently depressed values in US commercial real estateprovide an attractive point of entry for sovereign wealth funds,Cox says. "They tend to be long-term investors; they don’t need aquick turn in a hot housing market to make money," he says."They’re very much buy-and-hold kind of people."

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Hill & Knowlton and Penn Schoen Berland interviewed 1,064decision makers from the US, UK, Germany, Egypt and Brazil, Indiaand China this past January and February, to gauge their views on19 funds across Europe, the Middle East, Africa and Asia. Theyfound that only 9% of US respondents take "a much more favorable"view of sovereign wealth funds in general in the current market,compared to 22% of Indian elites and 39% of Brazilians. However,the score improves somewhat for the view of sovereign fundsinvesting during the eventual recovery.

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Regardless of respondents’ nationality, though, factors such aspolitical and economic stability were deemed important to thereputations of sovereign wealth funds and their host countries."Those attitudes were pretty uniform across the board,”" Coxsays.

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Paul Bubny

Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.