China Investment Corporation (CIC), the $575 billon sovereign wealth fund, is on the brink of buying a large office park in West London for around £800 million €947 million; $1.27 billion) from The Blackstone Group.
According to reports, CIC is in exclusive, advanced talks to buy the 1.8 million square foot asset which Blackstone originally bought early in 2011 on a 4.8 percent yield for £480 million from the Chiswick Park Unit Trust managed by Schroders, Stanhope and Aberdeen Asset Management.
Blackstone originally tried to sell the asset last year but pulled the deal from the market and subsequently refinanced it in May this year with a fresh £400 million senior loan by Deutsche Bank and a £200 million mezzanine loan provided by Apollo Global Management on behalf of a separate account mandate with Qatar Investment Authority (QIA).
Chiswick Park is a large business park set on 33 acres and provides more than 1.8 million square feet of office and mixed use such as retail and leisure facilities. When it was bought by Blackstone there was around 100,000 square feet of vacant space. In March this year, the US firm decided to press ahead with the development of Building 7, a 12-story, 334,000 square foot building to add to the complex.
For CIC this would be the second sizeable investment in the UK following a deal to buy the London headquarters building of Deutsche Bank last year.
The wealth fund has been building up its exposure to the asset class, and has around 0.62 percent – or $3.57 billion – of its allocation given over to property. Private equity accounts for 2.3 percent.
According to PERE’s Research and Analytics division, not only does it buy property direct but it also invests indirectly into funds. CIC increased its dependence on external managers for its investments. Around 64 percent of the SWF’s assets were externally managed by the end of 2012, versus 57 percent by the end of 2011.
Its annual report does not specify which assets are externally managed but did state it had recently placed emphasis on “long-term investments” which comprise real estate alongside infrastructure, mining and some private equity investments. Its net global returns for the 2012 calendar year spiked to 10.6 percent, up from -4.3 percent in 2011, and a large part of that turnaround was thanks to fund’s longer-term investments.
In July, CIC confirmed the appointment of a new chairman in Xuedong Ding, formerly a vice secretary general of China’s cabinet and vice finance minister. He replaced Jiwei Lou, who left CIC in March to become finance minister. With the appointment of the new chairman, PERE’s sister publication Infrastructure Investor understands that CIC is currently reviewing its allocations to the different alternative asset classes to present an allocation proposal to Ding.