Singapore SWF in midst of worldwide property spree

Don't tell GIC Private Ltd. executives that the tidal wave of liquidity central banks are flushing into capital markets has left little value to be had in prospective real estate investments around the globe.

On Dec. 1, the Singapore sovereign wealth fund, through its affiliates, agreed to buy 117 million square feet of U.S. industrial property from Blackstone Group LP for $8.1 billion. The deal caps a year that's seen the fund and its affiliates commit roughly $12 billion to real estate investments in the U.S., Europe and Asia. (All amounts in this story, unless otherwise noted, are in U.S. dollars.)

GIC has been “incredibly active in the last 12 months,” buying, selling and forming joint ventures, said Alistair Meadows, head of the international capital group, Asia Pacific, with Jones Lang LaSalle in Singapore.

Other real estate deals in the past three months have included:

nA commitment of up to $250 million to a joint venture with Indonesian property firm Rajawali Corp. to build office, retail, residential and mixed-use projects in Jakarta's central business district;

nAn $800 million commitment to a joint venture with Sydney, Australia-based shopping center operator Scentre Group to acquire five shopping centers in New Zealand;

nA $119 million investment in a joint venture with Goodman (NZ) to invest in the Viaduct Quarter section of Auckland, New Zealand's, central business district;

nThe purchase of a 20% stake in Turkish real estate developer Ronesans Gayrimenkul Yatirim A.S. for $308 million;

nThe purchase of Pacific Century Place Marunouchi, a 32-story mixed-use tower in Tokyo, from Secured Capital Japan Co. for $1.7 billion;

nThe sale — to Norway's Norges Bank Investment Management — of GIC's 100% interest in the Bank of America Merrill Lynch Financial Centre in the City of London for $913 million;

nThe purchase of a 30% stake in Spanish property developer Gmp Group for $313 million; and

nA $121 million investment in a joint venture with India-based property developer Brigade Group.

Those investments might have been made — at least to some extent — to lift GIC's real estate allocation to its target range of 9% to 13%. As of March 31, according to GIC's annual report, the fund had a 7% allocation.

Market veterans say GIC's flurry of real estate investments in recent months suggests a degree of confidence in the long-term prospects for property markets.

In an environment where key market segments — such as core assets in gateway cities — are widely seen as pricey, GIC officials appear to remain comfortable that pockets of value can still be had by those with the resources to ferret them out, said Henry Ching, a Hong Kong-based principal with Mercer, and Asia head of the consulting firm's real estate boutique.

Richard Tan, Hong Kong-based head of private markets, Asia, with Towers Watson & Co., said that as a general proposition, big asset owners in the region still see room for opportunistic allocations to specific markets, even if the market in general is not favorable.

Veteran real estate analysts say GIC's large internal team, and decades-long experience working with joint venture partners, leave the fund well-positioned to hunt for value in less obvious corners of the market.

Market watchers peg the size of GIC's real estate team between 150 and 200 people.

With 10 offices around the world and a deep investment team, GIC has “boots on the ground” and long experience in cultivating local property development partners capable of doing “scalable ventures,” said Nicholas Crockett, Singapore-based executive director of CBRE's Asia-Pacific capital advisers' team.

Many big institutional funds have gravitated to direct investments with local partners to gain more control over their programs, but GIC remains one of the leaders in moving beyond core, developed markets to emerging markets as well, noted Mr. Crockett.

JLL's Mr. Meadows pointed to the fund's October purchases of stakes in Spanish developer Gmp and Turkish developer RGY as an iteration of the partnership-joint venture model that a growing number of big institutional investors could employ in years to come.

Keeping up the pace of their real estate investments by “simply acquiring individual assets around the world” will prove increasingly difficult, resulting in more M&A platform deals, he predicted.

In an e-mailed response to questions, Chris Morrish, London-based regional head of GIC Real Estate, cited GIC's investments in RGY and Gmp as examples of his organization's long-term orientation attracting property developers that are “leaders in their respective markets,” with “better access to opportunities than we (have), as well as on-the-ground expertise to exploit such opportunities.”

While the number of these tie-ups remains small for now, the ability of asset owners to provide a capital injection to property developers in markets where liquidity and leverage are proving problematic could make countries such as China fertile ground for those platform deals, said Towers Watson's Mr. Tan.

GIC officials have declined to reveal the size of their fund, beyond saying it's well above $100 billion. Some estimates put the value of the portfolio at more than $300 billion. n