Singapore’s GIC Said Backing $1.1B US Office Acquisition

Singapore’s GIC is said to be putting up capital for one of the biggest bets on US office space this year as commercial real estate investor and operator Workspace Property Trust announced a $1.13 portfolio investment late on Monday.

The Florida-based real estate firm is buying a majority interest in a set of 41 suburban office assets across the United States in a bet that demand for desk space is moving beyond central business districts, with a Wall Street Journal report identifying GIC as Workspace’s financial backer in the deal.

The Singapore sovereign fund has teamed up with Workspace to purchase the stake in the eight million square foot (743,224 square metre) portfolio, with Workspace’s leadership tying the acquisition from US REIT Griffin Realty Trust to changes in office demand.

“Driven by the redefinition of work as a result of the pandemic and the continued and unabated demographic shift to the suburbs, more and more Fortune 1000 corporations are rethinking their presence in downtown markets and relocating many of their office needs to suburban locations across the US,” said Roger Thomas, co-founder and president of Workspace.

Remote Work Boosts Suburbs

With senior debt financing from JP Morgan and Canada’s Bank of Montreal supplementing GIC’s equity commitment, the deal will nearly double Workspace’s portfolio to 200 buildings spanning 18 million square feet of gross floor area in 22 US markets.

“With this transaction, Workspace becomes the preeminent national suburban office and light industrial company in the country and the preferred commercial real estate partner for the Fortune 1000,” said Workspace chairman and chief executive officer Thomas Rizk.

A significant slice of Workspace’s new properties, which comprise 53 buildings and one land parcel, are centred around Atlanta, Dallas and the San Francisco Bay area, the Journal noted,

Other assets in the portfolio are located in South Florida; Charlotte, North Carolina; Phoenix, Arizona; Minneapolis, Minnesota; Seattle, Washington; Portland, Oregon and Houston, Texas. Workspace said it will operate the buildings post-acquisition while the seller, GRT, will retain a minority stake.

Rizk said the office buildings are mostly leased to single-tenant blue chip firms without naming companies. Rizk, who co-founded the firm in 2015, said suburban cities are attracting major corporate occupiers as companies seek “to provide a safe, accessible, flexible, lifestyle-oriented, and community-based environment for their employees.”

Workspace was advised by Newmark Group on debt financing while Eastdil Secured, Goldman Sachs and BofA Securities served as financial advisors to GRT.

GIC declined to comment on the transaction.

GIC Remains Active

Citing a CBRE report released in June, Workspace pointed to an accelerating recovery in take-up of suburban offices in the US, with vacancy in the sector falling to 16.8 percent in the second quarter at the same time that occupancy in downtown markets slid to 17 percent.

While GIC is betting on suburban workplaces in the US, just two weeks ago it backed a city centre development Down Under when the sovereign fund acquired a half stake in an A$800 million ($568 million) Melbourne office project from Australian property giant Charter Hall.

The Singapore sovereign wealth fund ranked as the world’s most active state-owned sovereign wealth fund last year with about $34.5 billion invested in 110 deals.

A growing segment of that activity is focused on real estate as GIC upped its exposure to the property market to 10 percent in the financial year ending March from just eight percent a year earlier, amid rising market uncertainties globally.

Close-Out Sale

For GRT, disposing of the controlling stake in 53 of its buildings will help pay off debts as the property trust works prepares to spin off a new public company focused on industrial assets and close down the existing entity.

“The sale of these office assets advances our recently announced strategic monetization process which is intended to provide stockholders with as much liquidity as possible amid the current capital markets environment while maximizing value,” GRT president and CEO Michael Escalante said, noting how work-from-home trends are hurting leasing demand and influencing valuations of office properties.

Following the deal, which reportedly closed on Friday, the REIT will retain 57 office properties measuring 10.8 million square feet of rentable area and 23 industrial assets.