Singapore group, GIC, close to buying £1.7 billion Broadgate stake
Singapore's sovereign wealth fund is in talks to buy half of Broadgate, a large office and retail complex in the City of London, in what would be one of the biggest UK property deals since the financial crisis.
GIC, which last month changed its name from Government of Singapore Investment Corporation, is to buy the stake from private equity group Blackstone in a proposed deal worth about £1.7 billion, according to a person with knowledge of the matter.
GIC has been competing against other sovereign wealth funds, including the world's largest by assets, Norges Bank Investment Management, for the agreement.
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The move highlights sovereign wealth funds' increasing desire to buy high value London property. Cash rich investors from Asia, the Middle East and Europe have been piling into top end UK real estate, with an emphasis on the City and the West End, in search for higher returns than their fixed asset portfolios can deliver while interest rates remain at record lows.
Blackstone bought the stake in the 4 meter square feet estate from its owner British Land four years ago, in a deal that valued the entire property at £2.1 billion. The New York-private equity group has recently started raising a new European real estate fund targeting up to $5 billion, according to prospective investors.
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At the time of the original deal between Blackstone and British Land, Broadgate represented about 27 percent of the property company's portfolio, seen internally as a high exposure to a single asset. The private equity group was required not to sell its stake for three years, according to an agreement signed between the two parties. It is understood to have been sounding out potential buyers since May.
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Blackstone declined to comment and GIC could not be reached for comment.
During the past decade, GIC, which manages $100 billion of the city-state's foreign reserves, has reduced its exposure to bonds and cash, from more than two-thirds to less than one-third of its portfolio, while increasing its holdings in equities and alternative asset classes, such as property and private equity.
GIC has always had an appetite for real estate, fighting unsuccessfully in court with hedge fund investor John Paulson over some of the pickings in a troubled Morgan Stanley real estate fund two years ago.
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The appetite of sovereign wealth funds for property investments has increased in their global search for yield. The KIA, for example, recently took an equity interest in the big Hudson Yards redevelopment on the west side of Manhattan.