Singapore’s GIC Said to Invest in San Francisco Tower

Government of Singapore Investment Corp. is investing in a 30-year-old San Francisco office tower that’s valued at about $900 million, according to one person with direct knowledge of the transaction.

GIC, as the Singapore sovereign wealth fund is known, is part of a group that’s taking control of 101 California Street in San Francisco’s financial district, said the person, who asked not to be identified because the information isn’t public. The fund declined to comment in an e-mailed statement.

The sale of 101 California would be in line with the increased interest in U.S. real estate by sovereign funds from Asia, Europe and the Middle East, said Dan Fasulo, managing director of Real Capital Analytics Inc. The price for the tower would value the property at about $750 per square foot.

“101 California is the kind of trophy asset that every sovereign fund is looking for,” Fasulo said in a telephone interview, referring to commercial buildings with the best locations and physical appeal that attract competitive bidding.

GIC had 10 percent of its portfolio allocated to real estate at the end of March, unchanged from last year, the fund said in its latest annual report. Investments in the U.S. accounted for 33 percent of its portfolio, also unchanged from 2011. The report didn’t say how much of its assets in the U.S. are in real estate.

Rent Growth

The 48-story, 1.2 million-square-foot building, whose tenants include Morgan Stanley and Deutsche Bank AG, is owned by Nippon Life Insurance Co. and its partner Hines. Nippon Life’s 92 percent stake was up for sale.

Hiroyuki Kuboki, spokesman for the Osaka-based insurer, declined to comment on a possible sale. James Buie, chief executive officer for the western region at Houston-based Hines, which developed the property, also declined to comment in an e- mail.

San Francisco has the best five-year outlook for rent growth of any U.S. office market, propelled by leasing demand from technology companies and strict regulations on new development, Green Street Advisors said in an Oct. 16 report. Buildings in the city are estimated to show an 11 percent gain this year in revenue per available square foot, more than double the advances in Boston or San Jose, its closest rivals, according to the Newport Beach, California-based firm.

“San Francisco is a key gateway market, so it is a natural draw for foreign real estate investors looking for U.S. office exposure,” said Michael Knott, a managing director at Green Street. “What is different this cycle is that tech prowess seems sustainable, whereas finance and government, which drive New York and D.C. and were rock stars the last go around, are now open to more doubt and uncertainty.”

Asian Investors

Institutional investors from Asian nations are looking to increase their direct investment in U.S. property, said Jim Fetgatter, chief executive officer of the Association of Foreign Investors in Real Estate, a Washington-based trade group for non-U.S. investors. San Francisco was the fifth-most popular investment location behind New York, London, Washington, and Sao Paolo, according to a 2012 survey of AFIRE members.

“It wouldn’t surprise me if the bigger Asian sovereign funds are getting in as U.S. property markets come back into focus,” Thilo Hanemann, research director at New York-based Rhodium Group, which tracks Asian investment, said in a telephone interview.

Through mid-October, completed office sales in San Francisco’s central business district totaled $3.6 billion, according to Los Angeles-based services firm CBRE Group Inc.

To contact the reporter on this story: Dan Levy in San Francisco at dlevy13@bloomberg.net; Klaus Wille in Singapore at kwille@bloomberg.net

To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net; Andreea Papuc at apapuc1@bloomberg.net

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