GIC Pte bought Blackstone Group LP (BX)’s 50 percent stake in London’s Broadgate office complex in the latest overseas acquisition for the Singapore sovereign wealth fund as it seeks stable returns from real estate.
GIC purchased the cluster of 17 office buildings, shops and restaurants, which spans 4.7 million square feet in the City of London’s financial district, according to a statement by GIC and Blackstone today. New York-based Blackstone agreed to sell the stake for more than 1.7 billion pounds ($2.8 billion), Bloomberg News reported on Aug. 20.
GIC, which manages more than $100 billion of assets including stakes in Citigroup Inc. and UBS AG (UBSN), last year invested in an office tower in San Francisco’s financial district and was part of a group that’s buying the headquarters of Time Warner Inc. in New York City, a person with direct knowledge of the transaction said in November.
“The estate will give us an attractive combination of stable long-term income with the potential to create additional value through active management, repositioning of the office buildings and by enhancing the retail and leisure offer,” Christopher Morrish, European head of GIC Real Estate, said in the statement.
The fund’s 20-year annualized real rate of return, or gains on top of global inflation that it uses as its main metric, was 4 percent as of March 31, up from 3.9 percent the previous year, it said in its annual report. The annualized nominal rate of return in U.S. dollar terms over 20 years was 6.5 percent, underperforming a portfolio GIC had created as a benchmark with 65 percent of holdings in stocks and 35 percent in cash, it said in August.
GIC also signed a joint venture with British Land (BLND) Co., which will retain its 50 percent stake in Broadgate. The transaction also includes 5 Broadgate, a 710,000 square-foot office property that’s entirely prelet to UBS, according to the statement. British Land, which has 17.1 billion pounds of assets that it owns or manages in the U.K., will run Broadgate for the joint venture, it said in a separate statement with GIC.
GIC’s “major investment alongside us in Broadgate supports our belief in the quality and potential of the estate,” Chris Grigg, CEO of British Land, said in the statement.
Investors from the Asia-Pacific region were the most dominant buyers of real estate in the City of London in the first six months of 2013, spending 867 million pounds, Savills Plc said in an Aug. 19 report. Rents in the district are expected to rise 6.4 percent in 2014, broker Cushman & Wakefield Inc. said in an e-mail.
GIC had about 10 percent of its assets in real estate globally as of March 31, unchanged from the previous year, according to its annual report. The fund is ranked the eighth-biggest by the Las Vegas-based Sovereign Wealth Institute, which estimates its assets at $285 billion.
Property topped the list of state funds’ investments last year, overtaking commodities and financial services, Institutional Investor’s Sovereign Wealth Center in London said in May. Real estate made up 26 percent of investments, up from 14 percent in 2011, the center said.
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