RUSSIA - The real estate subsidiary of GIC, the Singapore sovereign wealth fund (SWF), is to develop a new suburb outside Moscow via a joint venture with Russian residential developer PIK.
GIC has acquired 25% of the joint venture project for US$233m (€157m).
The Mytischi development is northeast of the capital and will at completion in 2013 include 50 high-rise middle-income residential blocks, 13 low-rise commercial buildings, 12 schools, medical facilities and carparks. PIK says the project has a market value of of US$1.33bn.
GIC last week declined to answer further questions on the deal but a press statement quoted GIC Real Estate president Seek Ngee Huat describing the deal as "a strong entry into the Russian real estate market".
Concern in the EU and US over SWFs' investments in sensitive sectors have not apparently been echoed in Russia.
But an OECD paper at the end of last year urged the IMF to develop disclosure standards for the funds, including public pension funds in France, Norway, Sweden and Ireland.
"Sovereign wealth funds are typically fully invested overseas, given their origin as central bank reserves or resource exports," Juan Yermo, one of the report's authors, told IPE Real Estate. "SWFs still represent less than 15% of the total assets managed by pension funds worldwide, but it is true that they are growing much faster."
GIC last week responded with a promise of adherence to transparency standards currently in development. GIC deputy chairman Tony Tan was quoted as saying a move towards disclosure was "the right thing to do" after the fund triggered speculation the UK market had bottomed out by upping its shareholding in British Land above 3%.
Institutional investment in Russia, notably by Finnish investors, had built up after an extended period of caution. Most recently, Northern European Properties recently sold up its prime Finnish hotel assets in order to build up a war chest for Russian hotels, shopping centres and logistics. CEO Thomas Lindeborg cited yields of 10%, compared with 6% in its domestic market. (See earlier IPE Real Estate story: NEPR quits Finland for Russia)
Finnish property investor Sponda had earlier announced that it would invest up to €400m - up to 20% of its balance sheet - in Russia by the end of 2009. The firm has pension providers as its three largest investors: the Finnish state pension fund (0.63%), Ilmarinen (0.42%), and Etera Mutual (0.38%).