A blockbuster deal backed by GIC to take real estate investment trust Store Capital Corporation private is proof that Singapore’s sovereign wealth fund is continuing its swing towards US real estate – as a bolt hole from economic uncertainty.

This week, GIC partnered with Blue Owl Capital’s Oak Street to acquire the REIT, which invests in Single Tenant Operational Real Estate, in a US$14 billion cash transaction. Under the terms of the agreement to take the company private, shareholders will receive payments at a 20.4% premium of its closing price on September 14 and a premium of 17.8% to the 90-day volume weighted average stock price through that date.

Major shareholders currently include Oaktree Capital (25.1%), The Vanguard Group (13.4%), Principal Global Investors (5.5%), State Street Global Advisors (4.8%), and Principal Real Estate Investors. The deal is expected to close in Q1 2023.

The REIT’s portfolio totaled US$11.4 billion at end-June and includes properties used by restaurants, health clubs, medical offices, manufacturing facilities, and car dealerships. The company specializes in single-tenant properties leased on a net basis with tenants paying for all expenses, a model that has put retailers under stress due to the impact of inflation.

Nevertheless, GIC is confident about its acquisition. Adam Gallistel, GIC’s Head of Americas Real Estate, said, “As one of the largest dedicated U.S. net lease real estate companies in a nearly US$4 trillion-dollar market, Store Capital is a strong addition to GIC’s diverse portfolio of U.S. real estate investments.”

The transaction follows a trend in GIC’s investment behaviour, which has sought greater weight to long-term protection of the portfolio from adverse risk by focusing on real assets and the security of developed markets – while also retaining diverse exposures across all market segments. Yet, GIC is still seeking risk exposures, albeit via an increasingly active venture capital strategy involving n increasing number of small investments in early to growth stage startups.

Analysis of Global SWF’s transaction data finds that the proportion of real estate in overall private markets investment has grown steadily from 26% in 2019 to 57% in the year-to-date, while infrastructure has declined from 45% to 11% over the same period. Private equity has returned to 33% of total private markets investments, having grown to 40% in 2021 amid a surge in interest in venture capital. In terms of value, 2022 looks set to be a record year for GIC’s real estate investments, thanks to its involvement in taking Store Capital private.

At the same time, GIC’s real estate investments have swung heavily towards the US, from a negligible amount in 2019 to 45% of its value of total share in global real estate investments in 2022. The trend has largely been at the expense of emerging markets and developed Asia, reflecting perhaps a desire to reduce risk in the portfolio amid the Covid-19 pandemic.

In terms of market segments, GIC has sought to maintain a diverse and balanced portfolio, with investments spanning retail, residential, office, hotels, and logistics properties. Its decision to acquire a sizeable chunk of Store Capital will also provide scope in exposure to a multitude of commercial segments.

Related funds GIC
Related tags Real Estate Strategy