GIC Leads $14B Buyout of Warren Buffett’s Only REIT Investment

Singapore’s GIC is making its second mega-bet on the US property market within the last month with the sovereign wealth fund having joined with an American partner to buy Warren Buffett’s favourite REIT for $14 billion in cash.

GIC teamed up with Oak Street, a real estate private equity division of New York-based asset manager Blue Owl Capital, to sign a definitive agreement to acquire all of the shares in NYSE-listed Store Capital, the only REIT which Berkshire Hathaway boss Buffett has invested in.

“We are thrilled to lead this investment in Store Capital given its impressive cash flow profile, long-weighted average lease term and highly diversified portfolio with strong rent coverage,” said Lee Kok Sun, chief investment officer of real estate division at GIC.

The buyout, which remains subject to stockholder approval, will give GIC and Oak Street ownership of Store Capital’s portfolio of 3,012 single-tenant commercial and industrial properties across the United States, according to a joint statement on Thursday.

Sale-Leaseback Bonanza

The joint venture is buying out Store at $32.25 per share in cash, representing a 20.4 percent increase from its $26.79 stock price on 14 September and a premium of 17.8 percent when compared to its 90-day average share price. On the day of the announcement, the trust’s stock rose 20 percent.

“As one of the largest dedicated US net lease real estate companies in a nearly $4 trillion-dollar market, Store Capital is a strong addition to GIC’s diverse portfolio of US real estate investments,” said Adam Gallistel, GIC’s head of Americas real estate. “We are confident the company will continue its trajectory of accretive growth by meeting the demand for long-term financing solutions from middle market US companies.”

The Arizona-based REIT focuses on sale-leaseback transactions through which it buys properties from operating companies occupying the facilities and then rents them back to the vendor. It is also one of America’s biggest net lease real estate platforms – where lease agreements require tenants to pay for additional expenses such as utilities and taxes.

Excluding 16 properties that were vacant, the Store portfolio was 99.5 percent occupied with an average lease contract term of 13 years as of 30 June. The trust is letting go of its assets after booking a 19 percent year on year jump in first half revenues worth $445.9 million as reported in its latest operating results.

GIC announced its investment in Store just over two weeks after the sovereign fund was revealed to be the backer of a $1.13 billion buyout of commercial real estate investor and operator Workspace Property Trust.

Store’s properties are dispersed across all US states except Hawaii, with Texas, Illinois, California, Georgia, Florida and Ohio accounting for a third of its then 2,886 assets as of the end of last year, according to its most recent annual report.

As of 31 December, that portfolio measured 100,145 square feet (9,304 square metres) in combined built area, occupied by tenants across the service, retail and manufacturing sectors. Based on revenue share last year, the majority or 65 percent was sourced from facilities leased to the service sector, 20 percent in the manufacturing sector and 15 percent from retail tenants.

GIC’s Chicago-based partner, Oak Street also follows a net lease strategy and is primarily involved in structuring sale-leasebacks, as well as providing seed and strategic capital. Oak Street was acquired by Blue Owl last December in a $1.6 billion deal.

The buyout of Store Capital, which is subject to approval by Buffett (Berkshire Hathway owned 6,928,413 shares as of 30 June) and other stockholders, is expected to be completed in the first quarter of next year. Store has also been given a 30-day period to solicit and consider other acquisition proposals.

GIC and Oak Street did not disclose their individual ownership stakes in the joint venture.

Monster Deal

“We believe the Store Capital platform complements Oak Street’s exposure to the triple-net industry and our focus on sale-leasebacks,” said Oak Street president Marc Zahr. “The potential scale of this combination and partnership can deliver one of the most diversified, unique and long dated net lease platforms across the globe.”

The buyout deal, if completed, would become a “monster” transaction since Store is the third largest publicly traded net lease REIT, said Scott Merkle, managing partner at SLB Capital Advisors, who was not involved in the transaction.

“GIC and Oak Street are acquiring one of the most prolific sale leaseback investors that regularly deploys well north of $1 billion a year,” Merkle said in an emailed statement on Friday.

The acquisition would also mark GIC’s second investment in the US net lease sector following a $1.2 billion retail JV it established alongside New York-listed RPT Realty and two other American partners in March 2021.

Eastdil Secured Advisors and Citigroup Global Markets served as financial advisors for GIC and Oak Street in the transaction, while Store was assisted by Evercore and Goldman Sachs.

Closings of sale and leaseback deals in the US reached a record high of 236 transactions worth $10.2 billion in the second quarter, according to a report by SLB.

GIC Keeps Buying

GIC, which ranked as the world’s most active state-owned sovereign wealth fund last year, is beefing up its exposure overseas, having signed three deals worth more than $15.6 billion since August.

Late last month, the Singaporean investor reportedly backed Florida-based real estate investor and operator Workspace Property Trust in purchasing a majority stake in 41 suburban office assets with combined space of eight million square feet (743,224 square metres).

The $1.13 billion acquisition was supplemented by debt financing from JP Morgan and Canada’s Bank of Montreal.

Earlier in August, GIC made a bet Down Under with a purchase of a half stake in an A$800 million ($568 million) Melbourne office project from Australian property giant Charter Hall.