GIC acquire this Quebec warehouse as part of its buyout of Summit Industrial Income REIT. (Source: Summit)
Real estate accounted for 13 percent of GIC’s overall portfolio by the end of its fiscal year on 31 March as the Singapore sovereign fund boosted its allocation to the asset class by three percentage points from a year earlier following a set of overseas REIT privatisations and other property investments.
In declaring its results Wednesday for its 2022/23 annual report, GIC also said its annualised 20-year real rate of return – the primary metric for gauging its investment performance – rose to 4.6 percent for the period from 4.2 percent the year prior, marking its highest level since 2015.
The latest fiscal year marked the third consecutive year GIC increased its real estate allocations after having held steady at 7 percent from fiscal year 2014 through 2020.
“Infrastructure and real estate assets offer stable long-term returns and protect our portfolio from inflation. Our real estate portfolio currently funds part of our infrastructure investments and that has resulted in an overall growth of the real estate portfolio exposure,” a GIC spokesperson told Mingtiandi on Wednesday.
Buying Up US REITs
GIC’s increased real estate exposure was spurred by a trio of North American REIT buyouts over the past year, led by its $14 billion take-private of Store Capital alongside joint venture partner Oak Street completed in February, which gave the partners ownership of a portfolio of over 3,000 commercial and industrial properties across the US.
GIC chief executive Lim Chow Kiat (Getty Images)
That same month, the Singapore investor together with Canadian partner, Dream Industrial REIT, completed its C$5.9 billion (then $4.37 billion) takeover of Summit Industrial Income REIT which gave them ownership of 160 warehouses across four provinces in Canada.
The institution has continued its real estate purchases this year including announcing last week that it will acquire a newly built logistics facility near Nagoya, Japan from Daiwa House Industry.
That Japan purchase adds to the fund’s growing exposure to industrial real estate in Asia’s second-largest economy following its April purchase of a warehouse portfolio from Blackstone worth more than $800 million.
In June, GIC sealed another REIT deal with the completion of its buyout of INDUS Realty Trust, alongside US private equity firm Centerbridge Partners and the Abu Dhabi Investment Authority (ADIA). Valued at $868 million, the deal privatised the pure-play industrial REIT which had a portfolio of 42 assets across five US states.
The fund’s real estate holdings are spread across traditional private assets, public equities, REITs, and debt instruments in sectors such as logistics, student accommodation and hospitality.
Seeking Stable Returns
“In this era of continued uncertainty, making our portfolio more resilient is a key focus. We will continue to seek out investment opportunities with stable long-term returns,” GIC chief executive officer Lim Chow Kiat said in a letter to stakeholders.
Nominal bonds and cash accounted for 34 percent of GIC’s asset mix as they continued to constitute the largest share of its holdings, followed by private equity at 17 percent and real estate at 13 percent.
For what it terms strategic reasons, the firm does not reveal its fund size although it is estimated by the Sovereign Wealth Fund Institute to have $690 billion in assets under management, ranking it seventh largest in the world.
Geographically, the United States remained GIC’s largest market as it accounted for 38 percent of the fund’s assets, followed by Asia Pacific at 29 percent.
The fund’s predilection for investing in early stage deals and partnering directly with operators makes it among the more aggressive sovereign funds globally, with management vowing to continue this approach as part of their search for yield.
“Through active asset management, GIC can further generate income and enhance the market value of its assets through tenant management, market positioning, leasing, and capital improvements,” the institution said in the report.
Investing Through Disruptions
Lim said GIC remains focused on strengthening its portfolio’s resilience in the face of inflation and shielding it from disruptions caused by rising geopolitical tensions and other emerging risks.
Among the firm’s major actions was to raise the liquidity of its portfolio while emphasising having stable income-generating assets as a hedge against inflation. GIC also focused capital on sectors and countries expected to benefit from shifts in supply chains.
Lim said the world has to grapple with new disruptions caused by the advent of generative artificial intelligence (AI) and potential structural shifts from a regime of high interest rates.
The fund’s top leader noted that the world’s transition to a high interest rate regime could hurt many businesses and countries, and said that while the rapid adoption of generative AI opens growth opportunities for businesses, it could also present threats to security and society.
On 7 July, GIC strengthened its board by appointing Singapore deputy prime minister Lawrence Wong as chairman of its investment strategies committee, taking over the role previously held by former senior minister Tharman Shanmugaratnam who is currently running for president of Singapore.
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