GIC is backing a real estate fund targeting special situations in the UK.
Singapore’s sovereign wealth fund is the principal investor in Orchard Street Investment Management’s third Special Situations Fund, which will have £150m to invest, including 50% leverage.
It is the third time GIC has invested with Orchard Street, having backed the firm’s two previous funds. Orchard Street raised £300m from GIC for its first Special Situations Fund in 2008.
The new fund is targeting returns between 12% and 15%, most of which will come from income.
John Humberstone, partner at Orchard Street, said the fund was not opportunistic but it would not invest in “super” core assets either.
He said “there’s a lot that remains attractive about UK real estate” despite uncertainty surrounding the country’s anticipated withdrawal from the European Union.
“We are in a period of uncertainty, but in the next couple of years, there’s the likelihood [of] an interesting opportunity to invest in what is fundamentally good property at historically attractive pricing,” Humberstone said.
“Where there is uncertainty there is opportunity.”
Orchard Street will target the office, retail and industrial sectors.
Humberstone said it was hard to say if the aftermath of the UK referendum had affected valuations.
”Valuations have definitely come off since the start of this year and not just since 23 June,” he said.
“It’s impossible to say what is Brexit-related and what is [related to investors] just taking a step back.”
MSCI reported today that UK commercial real estate delivered a negative total return (-1.2%) in the third quarter, caused by a 2.4% drop in capital values between July and September.
IPE Real Estate understands that GIC had been divesting non-core real estate assets before the Brexit vote in June.
The November/December 2016 edition of IPE Real Estate will feature an in-depth interview with GIC’s new real estate CIO Lee Kok Sun