GIC to Make Real Estate History in London

(August 21, 2013) — A Singaporean sovereign wealth fund (SWF) is set to make the single largest transaction in UK real estate history with the purchase of half a large business complex in the City of London.

The Government Investment Corporation of Singapore (GIC) is to enter into the £1.7 billion deal to take over Blackstone’s 50% stake of London’s Broadgate development, Property Week reported today.

There had been suspicion that the Norwegian SWF would take the stake, and bolster its UK property portfolio, with several other large pension funds—including investors from North America—showing interest in the deal.

The Broadgate development is in the heart of the City of London and built around Liverpool Street Station, which is one of the busiest commuter hubs in the capital. The complex contains offices, retail, and leisure units.

The $247 billion GIC can expect annual rental income of up to of £224.5 million, according to Property Week.

Earlier this month GIC released its new investment plan, revealing it had made an average annual return over the last 20 years. Its asset pool is to be split into three segments, and move the fund away from the endowment model it has followed over the past decade.

Going forward, the GIC’s targeted real estate allocation from its “Policy Portfolio”, which it said was the central competent of its assets, will be between 9-13%.

“The revised Policy Portfolio has been simplified to focus on six core asset classes: developed market equities, emerging market equities, nominal bonds and cash, inflation-linked bonds, private equity and real estate. These asset classes represent the key systematic or market risks, and encapsulate the bulk of the risk and return potential of the GIC Portfolio,” the plan said

The remaining segments, the Reference Portfolio and Actively Portfolio, will take on global, long-term market exposure and “skill-based” strategies that fall outside of the other two categories, respectively.