GIC Invests in $1.2B US Retail JV with RPT Realty, Monarch, Zimmer

Singapore sovereign wealth fund GIC has made a further bet on middlebrow American retail by investing in a joint venture with New York-listed RPT Realty and two other US-based partners, targeting the acquisition of over $1.2 billion in strategic assets.

RPT, a REIT that owns and operates a portfolio of shopping centres in big US cities and suburbs, announced last week the formation of a retail real estate platform called RGMZ with GIC, hedge fund Zimmer Partners and investment firm Monarch Alternative Capital.

The four players have committed to funding $470 million worth of acquisitions over the next three years for the platform, which will be seeded with 42 single-tenant, net lease retail assets created by RPT after the subdivision of some of its existing shopping centres.

The RGMZ platform is GIC’s second investment with RPT, following the establishment of a grocery-anchored $412.4 million shopping centre JV known as R2G in late 2019.

“We expect to create value in identifying pricing inefficiencies between different tenant and property types within the retail sector,” said Lee Kok Sun, chief investment officer of real estate at GIC. “We are pleased to grow our strategic partnership with RPT, and look forward to scaling the joint venture together.”

Unlocking Value

RGMZ’s initial seed portfolio is valued at $151 million and represents 6 percent of RPT’s fourth-quarter 2020 annualised base rent. RPT will hold a 6 percent equity stake and manage the day-to-day operations of the platform, source acquisitions and receive management, construction management and leasing fees. The other three partners will hold the remaining 94 percent of RGMZ.

Additionally, RPT will invest up to $70 million in preferred equity that will be a component of the Zimmer/Monarch equity commitment and will not be a direct obligation of the platform. RGMZ has received commitments for a $175 million secured credit facility to fund acquisitions, including the initial portfolio, subject to final loan documentation.

RPT describes its approach as a complementary net lease strategy that will enable the REIT to unlock value in mispriced multi-tenant assets. In a net lease, the lessee pays some or all of the taxes, insurance fees and maintenance costs for a property in addition to rent.

Although RPT has yet to specify which single-tenant assets it will sell to RGMZ, a presentation made available by the REIT suggests a mix of resilient, high-credit-quality tenants with long-term leases — names like Starbucks, Whole Foods Market and Walgreens.

The exit strategy upon full deployment is to retain, sell or stage an IPO for the $1.3 billion portfolio.

Shopping Centre Empire

New York-based RPT, formerly known as Ramco Properties Trust and Ramco-Gershenson Properties Trust, owns and operates 49 shopping centres (including five owned through a joint venture) with 11.9 million square feet (1,105,546 square metres) of gross leasable area.

Among the REIT’s flagship properties are River City Marketplace in Jacksonville, Florida; The Shops on Lane Avenue in Upper Arlington, Ohio; Woodbury Lakes in Woodbury, Minnesota; and Webster Place in Chicago.

Before hooking up with RPT, GIC’s most recent US deal was in October 2019 when the fund formed a joint venture with a New York-listed REIT, Summit Hotel Properties, to acquire four hotels along the west coast of the US for $249 million. The 710-room portfolio consists of two Residence Inn by Marriott hotels in Portland, Oregon, and a pair of Hilton Garden Inns in California’s Bay Area.

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