Investor Profile: GIC’s deep pockets serve long-term strategy

When Singaporean sovereign wealth fund, GIC, inked a deal to expand its hospitality holdings in the Mediterranean in October 2023, it was just the latest example of flag-planting by this ambitious, global investor. The deal in question saw GIC partner with Blackstone to secure a 35% stake in Spain’s Hotel Investment Partner (HIP), which has a portfolio including some 72 hotels with more than 21,000 keys across Spain, Greece, Italy, and Portugal. The deal valued HIP at more than €4 billion, underlining GIC’s firepower as well as its interest in the high performing markets of Southern Europe. Lee Kok Sun, chief investment officer, Real Estate, GIC, said at the time that the fund was “delighted to be partnering with Blackstone to invest in one of the most established Mediterranean Europe hospitality platforms”.  But it was far from the first foray by the Singaporean fund into the region, or indeed, into hospitality real estate, one of its fastest growing convictions.

Professional fund management company GIC was founded in 1981 to invest Singapore’s extensive foreign reserves, which it jointly manages alongside The Monetary Authority of Singapore (MAS), the country’s central bank, and investment company Temasek. Although GIC does not disclose the amount of funds it manages, nor its annual profit and loss, MAS revealed in April 2019 that the country’s total accumulated official foreign reserves amounted to around $300 billion, excluding the portions managed by GIC and Temasek. Sources close to GIC suggest that the firm currently holds some $100 billion of assets worldwide. Singapore’s foreign reserves are rated the third highest in the world as a percentage of GDP, quite a feat considering that Singapore has been independent for less than 60 years and has a population of just 5.6 million.

Big wins

With a mandate to invest the reserves in a globally diversified portfolio of asset classes to deliver good long-term returns, GIC’s investment committee has a both enviable and challenging task – there have been big mistakes and big wins in equal measure. GIC famously sunk $200 million in equity and some $575 million in secondary loans into Manhattan’s largest apartment complex, the Stuyvesant Town–Peter Cooper Village, on the eve of the Global Financial Crisis (GFC). When managers Tishman Speyer Properties and BlackRock Realty defaulted on their loan in 2010, GIC effectively lost its stake. The fund also tried to bail out Swiss Bank UBS as the subprime crisis broke, losing an estimated 70% of its CHF 11 billion investment. Yet as one of the pioneers of cross-border investment, the fund has also grown rapidly via many astute deals. Private equity and real estate reportedly account for an estimated 18% of GIC’s investments today. The fund has local teams spread over nine offices on four continents, and has built a real estate portfolio of direct and indirect investments with more than 350 investments in over 40 countries. All that makes GIC one of the world’s largest asset managers today, with a firm conviction in bricks and mortar and a globally diversified portfolio.

Says Tracy Stroh, GIC’s head of Europe real estate: “One of the benefits I’ve had working at GIC is I’ve sat in all three regions. The eurozone is a big economy – it’s a major economic bloc, but it is also fragmented.

“‘But we have boots on the ground, and we’ve been investing in real estate for over 40 years globally and in Europe, for over 30 years. I think if you are an international investor, it can be a little difficult to scale up in Europe given the fragmentation.

“It has taken us several years to get to the scale we are at. You have to be patient. I think that is one thing that GIC has – as a long-term investor, we have the patience and ability to execute and build that scale.”

Geographical diversification

According to GIC, its average real estate holdings in the past decade have been split around 52% in Asia, 28% in the Americas and 20% in Europe. While office real estate has traditionally been the largest allocation at 34%, followed by retail at 19%, its hospitality holdings at 13% – virtually matching its residential and industrial allocations – represent a growing segment. GIC’s activities in the hotel sector have ramped up in the past decade, with major deals including a deal for a $464 million stake in the 1,016-key Sheraton Grande Hotel in Tokyo in 2017, and joining in a consortium to take a majority share of AccorInvest, the real estate arm of Accor, in 2018. This €4.4 billion deal saw the fund team up with the likes of Saudi Arabia’s PIF, Credit Agricole Assurances, Colony NorthStar and Amundi. In 2019, meanwhile, GIC swooped on a 25% stake in CitizenM, the Dutch boutique hotel chain, rumoured to have cost the fund in the region of half a billion. At the time, GIC and other investors, KRC Capital and pension provider APG, also jointly committed to a further €750 million spend to expand the venture. Lee Kok Sun called CitizenM “an attractive value proposition of affordable luxury in urban markets”. 

European beds

Yet the last couple of years have seen the deals accelerate still further, with plenty of appetite for European beds. In 2022, GIC teamed up with Greystar on the €4.43 billion takeover of Student Roost from Brookfield, as well as acquiring a €2.1 billion majority stake in The Social Hub, formerly The Student Hotel, in partnership with Dutch pension provider APG. A deal for a majority stake in Sani/Ikos Group was also inked in the same year, valuing the Mediterranean luxury hospitality group at €2.3 billion.

The move six months ago to check into HIP shows that GIC remains alert to Southern Europe’s buoyant charms, while it continues to spread its net far and wide. Note too deals in Asia, such as GIC’s 2022 acquisition of 26 hotels from Seibu Holdings, in what GIC head of real estate Japan, Ken Sugimoto, called “a unique opportunity to acquire a sizable portfolio of high-quality assets located in prime locations throughout Japan, and work with one of the largest and most established domestic hotel operators in a long-term tailwind sector.”  

Says Stroh: “‘An investor like GIC looks across cycles on a very long-term horizon – resilience and diversification is very important to us.

“We are all very clear on the role that real estate plays so we look for a little bit of an edge to secure a steady stream of income from our different real estate investments. Europe remains a key place to scale for us, but the private markets are always a bit more illiquid and fragmented, so it ebbs and flows.”