Israfil Mammadov can afford to be picky. The chief investment officer of the $34 billion (£23 billion) State Oil Fund of Azerbaijan said yes to sausages but no to mash at lunch last week. Earlier the stocky custodian of the country’s fast-accumulating oil riches told an audience at the Bafta theatre in Piccadilly that 200 London properties were sampled, before only one was purchased.
On December 17, the fund paid £177 million for an office block in St James’s Street, occupied by HSBC, who have given a guarantee to pay £9.3 million a year in rent until 2023. Not hard to see why this was the first property purchase by a fund which might invest $10 billion, or even more, on property. There was another reason for picking that particular investment, said Mammadov between bites of his sausage. The sculpted stone Victorian block just looks solid. “I need to put a picture of the building on our website so our sponsors can see what we are buying is good.”
By sponsors, Mammadov means his own government. “We are extremely transparent.” This may jar with your view of a Caucasus state of 9.4 million, run by Ilham Aliyev. But the fund is up there with Ireland, Australia and New Zealand in the Sovereign Wealth Fund Institute transparency index.
Oil revenues will pump the fund up six-fold to $200 billion in 10 to 15 years, says Mammadov. He added that he now has between $1.6 billion and $1.7 billion to spend on solid real estate. About 5% of current assets; a percentage which might rise.
Two days after the St James’s purchase, the fund paid €135 million (£118 million) for a very solid block in the Place Vendôme in Paris. But “it is a very painful process,” Mammadov says. “We want to spend 5% of our funds on the asset class. But we spend a lot more than 5% of our time buying property.” Give that man some mash for saying so in public.
