Sovereign wealth and public pension funds are limbering up for a race for Asian real estate acquisitions, but are biding their time in anticipation of snapping up bargains amid signs of a market downturn.

Singaporean state-owned investors Temasek and GIC, with combined AUM of around US$1 trillion, indicated in recent days they are waiting for asset prices to drop before increasing real estate investments in the region.

At the Milken Institute Asia Summit in Singapore, Temasek CIO Rohit Sipahimalani said, “Current valuations are not reflecting the risk of downturn we see in the next 12 to 18 months. I do expect as these valuations correct, we will again step up our pace of investment.”

Around 63% of Temasek’s portfolio exposure is to the Asia Pacific region, mostly Singapore and China. A large part of its real estate investment comprises its 52.2% stake in Singapore-based investor CapitaLand, which is worth S$9.6 billion (US$6.8 billion), and its ownership of Mapletree Investments, which has a total AUM of S$78.7 billion (US$55 billion). Mapletree Investments manages three Singapore-listed REITs and six private equity real estate funds, which hold a diverse portfolio of assets in Asia Pacific, Europe, the UK, and the USA). 

Meanwhile, GIC is now examining property deals in Japan due to the falling value of the yen and rising interest in hotels and resort properties, following the lifting of pandemic-related travel restrictions. It has recently acquired properties from Japanese railway and hotel conglomerate Seibu Holdings, but is also examining residential and logistics projects. GIC’s mandate requires it to only invest in foreign assets.

Head of global investment and portfolio strategy, Goh Chin Kiong, told Bloomberg, “GIC has always been interested in Japan real estate; we continue to be and we want to do more, which you can interpret as an increase in attractiveness for us. Financing costs in Japan have continued to stay low, especially relative to the rest of the world. The levered yield to us is attractive, especially versus Japanese yen bonds."

GIC is also heavily focused on Australian real estate, having established a new office in Sydney in recent months. This week, it pledged to support ESR Australia Logistics Partnership II, less than a month after backing ESR Australia Logistics Partnership III, representing a total commitment of around A$1 billion (US$651 million). Other recent investments include a 50% stake in Charter Hall's 555 Collins Street office building in Melbourne worth A$750 million, joint ownership of Peninsula Private Hospital in Brisbane, and a 50% stake in the Wee Hur PBSA Master Trust portfolio of student accommodation for A$568 million.

Singapore Inc is not the only fund seeking to ramp up its Asian real estate portfolio as recessionary fears mount. Canadian public pension fund the Ontario Municipal Employees Retirement System (OMERS) aims to triple its assets in Asia-Pacific by 2030 from the current level of C$13 billion ($9.5 billion), CEO Blake Hutcheson told the Milken Institute Asia Summit.

"So far we're very focused on India and Australia in two areas — infrastructure and real estate — and basically computer screen investing in the rest of Asia and Southeast Asia from an equities standpoint," he said.

Meanwhile, Ontario Teachers’ Pension Plan (OTPP) is set to ramp up its real estate investments in India. It established an office in Mumbai last month and indicating a doubling of staff at its Singapore base, which is moving to new offices t enable it to expand to up to 50 personnel. It is targeting a doubling of its Asian exposure, with its real estate unit, Cadillac Fairview, mobilising its own Singapore staff to support the regional push.

Related funds GIC OMERS OTPP Temasek