GIC on the brink of acquiring pan-European logistics portfolio for almost €1bn

Singapore’s sovereign wealth fund GIC is believed to be on the brink of making a dramatic return to the European logistics space with its expected acquisition of a pan-European logistics portfolio, “Project Maximus”, from Apollo Global Management and Palmira Capital Partners for almost €1bn, according to those who track the market.

The portfolio comprises properties in markets such as Germany, Eastern Europe and the Benelux region. German assets are believed to account for 60% of the portfolio’s value, or around 14 properties.

Cushman & Wakefield has been mandated to sell the portfolio. A company spokesperson declined to comment. GIC and Apollo could not be reached for comment. Palmira Capital Partners declined to comment.

GIC entered the European logistics market in 2016 with its acquisition of P3 Logistics Parks, a pan-European owner, developer and manager of logistics properties, from TPG Real Estate and its partner Ivanhoé Cambridge for €2.4bn. At the time, Lee Kok Sun, CIO at GIC Real Estate, said: ‘We are confident of the long-term potential of the European logistics sector, and look forward to expanding this attractive platform with the very capable P3 management team.’

In Germany, the logistics and industrial asset class recorded its second-best year ever last year with a transaction volume of almost €7.5b. Mid-cap transactions grew significantly, and proved to be an extremely dynamic segment with 140 deals recorded, totaling €810m.

Singapore’s sovereign wealth fund has inked some other interesting deals this year. In October, it acquired the PB6, an office tower in Paris, a 40-storey asset across 60,000 sqm, which is fully leased to France’s main electricity group, EDF, in La Défense, for an undisclosed sum.

GIC channelling major capital into infrastructure

This year, GIC has been channelling major capital into infrastructure, with a slew of deals in recent months. Earlier this month, it acquired Kellas Midstream in partnership with BlackRock’s Global Energy & Power Infrastructure Funds, for an undisclosed sum. Kellas Midstream owns and operates key gas infrastructure in the UK Central and Southern North Sea.

‘We are pleased to invest in Kellas, a leading provider of high-quality midstream infrastructure with a strong track record,’ said Ang Eng Seng, CIO of Infrastructure at GIC. ‘As a long-term investor, we look forward to partnering with BlackRock and Kellas’ management to support the future growth of the company.’

Mark Florian, group head of the global energy & power infrastructure funds team at BlackRock highlighted the move on the part of institutional investors into the infrastructure space: ‘A growing number of institutional investors are seeking exposure to energy and power investments,’ he said. ‘Within the sector, energy from gas is viewed as a necessary component of the energy transition as we move towards a lower carbon economy. This investment in Kellas Midstream reflects the focus of GEPIF III on making strong equity investments in mid-market energy and power infrastructure and partnering with outstanding management teams.’

In August, Indian developer IRB announced that GIC would invest up to 44 billion rupees (€555m) in its portfolio of nine operational and under construction roads in India. As part of the deal, IRB transferred the nine assets into a newly established infrastructure investment trust (InvIT), in which GIC affiliates hold a 49% stake, with IRB owning the remaining share. The projects span around 1,200 km in the states of Rajasthan, Karnataka Haryana, Uttar Pradesh, Gujarat and Maharashtra. According to IRB’s statement, the portfolio generated 6.3 billion rupees during 2019. In April, GIC invested 80 billion rupees with SSG Capital Management and Tata to acquire a combined 45% share in GMR’s airport subsidiary that manages New Delhi airport.

The group has also been targeting infrastructure elsewhere: in July, it announced that it would invest $600m in select crude pipeline infrastructure belonging to the Abu Dhabi National Oil Company (ADNOC), following BlackRock, KKR and the Abu Dhabi Retirement Pensions and Benefits Fund (ADRPBF), who earlier this year also signed agreements to invest $4.3bn in these assets. The deal took the combined lease-based investment of GIC, ADRPBF, KKR and BlackRock to $4.9bn. This follow-on investment agreement saw GIC acquire a 6% stake in a newly formed entity, ADNOC Oil Pipelines, with BlackRock and KKR together holding 40%, ADRPBF 3% and ADNOC the remaining 51%.

Move towards private equity

GIC has also changed tack this year by increasing its exposure to private equity whilst cutting back on investment in public stocks in developed countries. The investor said its exposure to equities in developed markets fell by 4% between March 2018 and March 209 to 19%, reflecting a similar drop on the previous year. The shift is likely due, in part, to global trade wars as well as the ongoing low interest rate environment that is prompting many investors to seek out new revenue streams. It is now allocating around 12% of its fund to private equity, compared to 9% two years ago. The behemoth doesn’t publish its assets under management, simply stating that they are in excess of $100bn.