Singapore's sovereign wealth fund has agreed to buy half of Broadgate, a large office and retail complex at the heart of the City of London, in one of the biggest European property deals since the financial crisis. GIC Private Limited, formerly known as Government of Singapore Investment Corporation, is buying the stake from New York-based fund manager Blackstone for about 1.7bn dollars, according to people with knowledge of the terms, which were not disclosed.
/ Source: Financial Times
The transaction is about the same size as the purchase, earlier this month, of More London, a commercial development, by a Kuwait-backed vehicle. Both deals outstrip any others in Europe in the post-crisis period, according to financiers. Broadgate is GIC's biggest real estate investment in Europe. It highlights the strategy of sovereign wealth funds increasingly investing directly rather than through funds managed by others. The Singaporean group was selected as preferred bidder in August over other sovereign wealth funds including Norges Bank Investment Management, the world's largest by assets.
The agreement also underscores the appeal of high-value London property with an emphasis on the City and the West End. The attraction is particularly powerful for cash-rich investors in search of higher returns than their fixed income portfolios can deliver while interest rates remain at record lows. Blackstone bought the stake in the 4m sq ft estate from British Land four years ago, in a deal that valued the entire property at 2.1bn dollars. British Land remains the owner of the other 50 per cent of the site. "We believe it provides a rare opportunity to invest in a world-class asset," Christopher Morrish, head of Europe at GIC Real Estate, said in a statement. "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."
During the past decade, GIC, which manages $100bn of the city-state's foreign reserves, has reduced its exposure to bonds and cash, from more than two-thirds to less than one-third of its portfolio. At the same time it has increased its holdings in equities and alternative asset classes such as property and private equity, allocating about 10 per cent of its assets to real estate. GIC has invested in real estate globally for more than three decades but has been increasing its direct exposure in recent years.
The Broadgate transaction includes a 50 per cent interest in 5 Broadgate, a new 710,000 sq ft office building due to be completed in 2015 and pre-let in its entirety to Swiss bank UBS. GIC and British Land plan to redevelop properties within the estate as they come vacant.