Blueprint: GPIF’s first real estate fund investment, BentallGreenOak’s industrial REIT IPO, GI Partners’ hedge to office

Japan's GPIF taps Blackstone for first direct real estate fund investment after previously investing in fund of funds, BentallGreenOak launches $5 billion REIT to capture retail capital for industrial real estate investments, GI Partners' founder sees data centers as a natural hedge to office; and more in today's briefing, exclusively for our valued subscribers.

They said it

“What seems inevitable and obvious over my career has not played out to be inevitable and obvious.”

Ralph Rosenberg, global head of real estate at KKR, speaking on the difficulty of predicting the future of cities in a McKinsey webinar last week.

What’s New

Two giants align: GPIF, having formerly focused on fund of fund investments, made its first direct real estate commitment to a fund, committing $500 million to Blackstone’s BREP X (Source: Getty)

GPIF takes the next step
Japan’s Government Pension Investment Fund has made its first commitment to a private equity real estate fund. The investor allocated $500 million to Blackstone’s global flagship opportunistic fund Blackstone Real Estate Partners X, according to its annual report. The pension had previously only invested in the asset class via fund of funds and gatekeepers since it first began property investing in 2017. The investor grew its real estate assets under management by 18 percent to ¥919 billion ($6.5 billion; €5.9 billion) from the year before, citing “investment progress” and “exchange rate fluctuation.” GPIF is also an investor in three fund of funds under Mitsubishi UFJ Trust Bank, CBRE Investment Management and LaSalle Investment Management. Read our full coverage here.

New York-based BentallGreenOak, a mainstay in the top 10 of PERE’s top 100 ranking, is bolstering its product ranks with the launch of another fundraising vehicle, this time on the retail capital side. BGO has launched its Industrial Real Estate Income Trust via a public offering, allowing the purchase of shares of up to $4 billion in a primary offering and up to $1 billion of shares pursuant to a distribution reinvestment plan, an announcement stated. The firm is looking to invest in warehouse and logistics assets in the US with the capital. To a lesser extent, BGO can also make invest in real estate debt and real estate securities via BGO IREIT. The firm has already purchased an interest in a seed portfolio of 29 buildings in the Midwest with the REIT’s capital, according to reports.

A hedge to office
In law firm White & Case’s 2023 real estate market sentiment survey, office – not surprisingly – was viewed by investors as the property type least likely to outperform over the next 12 months. On the opposite end of the spectrum, digital infrastructure was considered most likely to outperform over the same period. “I think these data centers are becoming a natural hedge to office,” said Rick Magnuson, founder and executive managing director at San Francisco-based private investment firm GI Partners. The workers that once populated office buildings are now working remotely, thanks to software-as-a-service applications being supported by data centers, he explained. Similarly, industrial was a natural hedge to retail because “industrial benefited greatly from the reorganization of how people buy products. The same thing is happening with data centers. It’s a different orientation of thinking about real estate.” For more on Magnuson’s views on data centers and how AI is now powering the next wave of demand, check out our coverage here.

Trending topics

Size does not fit all

A spate of recent headlines would have us believe that every business is reducing its office space in London. But while HSBC, Clifford Chance and other large international corporations are taking significantly less space, research from broker JLL shows the average size of leasing transactions in Central London in H1 2023 is not far off the 15-year average. Longer-term office attendance patterns are still hard to predict, however, as the hybrid working debate rages on. This is why other factors like well-connected and amenitized locations, best-in-class sustainability ratings and flexible configurations of space are equally critical to understanding occupier demand. Rob Thompson, a partner in the real estate group at law firm Dentons, which is downsizing by more than half when it moves to One Liverpool Street in 2026, tells PERE working out how much space the business needs was one of the most difficult parts of the moving process. However, as far as ESG goes, “any developer or landlord that we felt was cutting corners on ESG or sustainability targets would have been a negative for us.” Read more in our analysis.

‘Yes please’ to net leaseCap rates in the US single-tenant net lease sector increased for a fourth consecutive quarter for retail, office and industrial in Q1 2023, according to the most recent data from sector specialist services firm The Boulder Group. As risk appetite recedes, the sector is attracting greater interest, not least because of its bond-like cashflows.

But there are reasons to be cautious, as explored in PERE’s Net Lease special report. A significant risk is a ‘double-whammy’ where a tenant default results in a negative credit outcome and ownership of a property that needs reletting, so asset selection – and favoring generic properties that will appeal to multiple types of tenants – is important. The other defense is to do the work upfront on assessing tenant creditworthiness, which is a vital element of net lease success that not all real estate managers are used to prioritizing.

The ODCE goes global
Trade organizations ANREV, INREV and NCREIF, representing investors in Asia-Pacific, Europe and the US respectively, have launched the Global ODCE Funds Consultation Index. As with the index’s predecessor benchmarking tools, the Global ODCE aims to improve transparency for investors by consolidating the performance of non-listed real estate open-end diversified core funds in the first index of its kind. Iryna Pylypchuk, director of research and market information at INREV, tells PERE its introduction reflects changes in capital movements and the increasingly globally diversified strategy of the modern real estate investor. “Bringing the three regional ODCE Indices together on a global level, in an equally weighted index to reflect the relative sizes of the non-listed real estate markets in the three regions, creates a powerful benchmark.” Check out our coverage of the inaugural returns data from the Global ODCE here.

Data snapshot

Losing interest in real estate
Real estate is currently perceived as the least attractive private asset class due to challenges in traditional real estate sectors such as office and retail. According to Invesco’s Global Sovereign Asset Management Study 2023, investors’ net allocation intentions in the asset class dropped from 23 percent in 2020-22 to 9 percent in 2023.


ESR introduces new group CIO
Asia Pacific industrial heavyweight ESR Group has promoted Josh Daitch as the group chief investment officer to oversee the fund management, capital raising, research and analytics and new product creation. Having joined the firm in 2018 as the group’s head of capital and new economy fund management, Daitch played a key role in building the firm’s investor relationships and improving performance. His promotion comes as the firm is expanding its fund management platform by launching discretionary vehicles after the acquisition of ARA Asset Management. Among the funds ESR has recently launched are the ESR LOGOS Pan Asia Logistics Core+ Venture and a $1 billion infrastructure fund that ARA closed in November in partnership with the Export-Import Bank of China.

Investor watch

A slowing pace
San Bernardino County Employees’ Retirement Association has the capacity to invest up to $90 million in real estate in the second half of the year, but the pension’s capital outlays could be significantly lower based on market conditions. According to public documents, the California investor has only committed $10 million this year, to a direct investment in a life science development alongside New York-based Apollo Global Management, despite setting a $100 million investment target at the start of the year. “Real estate markets have continued to face challenges of uncertain demand and higher interest rates,” documents stated. Staff reviewed a further $34 million-worth of investments across five opportunities but passed on all of them. Last year proved similarly difficult to allocate capital to the asset class for SBCERA, having slated $100 million for investment but only committing $45 million across two opportunities.

This week’s investor meetings

Tuesday, July 18

Wednesday, July 19

Thursday, July 20

Friday, July 21

Today’s letter was prepared by Peter Benson, with Jonathan Brasse, Evelyn Lee, Charlotte D’Souza and Christie Ou contributing